There are various retirement income pillars on which Americans rely. One such pillar is fixed indexed annuities,* also referred to as FIAs, which help create a retirement income that will last. These annuities are versatile financial tools that can provide you with the income and growth potential you need during retirement, without exposing you to undue risk.
A fixed indexed annuity is an insurance contract linked to a common market index, such as the S&P 500.** If the index experiences a gain, you and the insurance company are both entitled to a share of the earnings. If the index suffers a loss, depending on the fixed indexed annuity in which you are invested, typically the insurance company will absorb it, but your account value will not decrease.
When you buy a fixed indexed annuity, the insurance company may offer you the option to purchase an income rider to add to the policy, which will provide income in the form of regular withdrawals from your annuity rather than annuitized payments. An income rider is basically the amount of money from which the insurance company may pay you an income while you have your money in their annuity. Your income rider is a larger number than what your investment is actually worth and may increase in value over time, potentially providing you with more income.
Having a lifetime income benefit rider helps you take lifetime income from your fixed indexed annuity without losing control of your retirement assets. They are designed to help provide principal protection, and for predictability and minimum income guarantees to people who are worried about running out of money in retirement.
If you don’t need your fixed indexed annuity to provide you with income right away, the income rider of a fixed indexed annuity often has a “roll up” value. This means that every year that you don’t tap into the income stream created by the income rider, its value will increase by a set amount and this increase will continue, regardless of the market’s performance, until you trigger the income rider and begin receiving payments from it.
When you purchase a fixed indexed annuity with this type of feature, you can be reasonably sure that your income needs will be met, and possibly surpassed, even in an uncertain economy or volatile market.
Fixed indexed income annuities with an income rider can help address changes that retirement brings and help you financially survive, even thrive, during your retirement – and enjoy the retirement you have been working for without having to worry about outliving your income! QCBN
*Annuities are designed to be long-term investments and frequently involve substantial charges such as administrative fees, annual contract fees, mortality & risk expense charges and surrender charges. Early withdrawals may impact annuity cash values and death benefits. Taxes are payable upon withdrawal of funds. An additional 10 percent IRS penalty may apply to withdrawals prior to age 59 ½. Annuities are not guaranteed by the FDIC or any other governmental agency and are not deposits or other obligations of or guaranteed or endorsed by any bank or savings association. With fixed annuities, both the money you invest and the interest paid out are guaranteed by the claims-paying ability of the insurer. Investments in variable annuities will fluctuate and values upon redemption may be less than the original amount invested. Investors should consider the investment objectives, risks, charges and expenses of a fixed and/or variable annuity carefully before investing. Prospectuses containing this and other information about the annuity are available by contacting your registered representative. Please read the prospectus carefully before investing to ensure the fixed and/or variable annuity is appropriate for your goals and risk tolerance.
** The Standard and Poor’s 500 is an unmanaged, capitalization weighted benchmark that tracks broad-based changes in the U.S. stock market. This index of 500 common stocks is comprised of 400 industrial, 20 transportation, 40 utility and 40 financial companies representing major U.S. industry sectors. The index is calculated on a total return basis with dividends reinvested and is not available for direct investment.
Ronald F. Stevenson & Barbara E. Clark own American Financial Security, LLC. They specialize in Retirement Income Planning, Social Security Maximization, Tax Free Income Design, Personal & Corporate Tax Preparation and Planning. For more information, call 928-771-8368 or visit www.AmericanFinancialSecurity.net, 3112 Clearwater Dr., Suite B, Prescott, AZ 86305.