Published April 30, 2012
Most people know where to find opportunity; the stock market, possibly real estate. Most people know where to find safety; a bank CD, a bond or maybe a fixed annuity.
Few people however, know where to find opportunity & safety at the same time & on the same dollar. This is exactly what a Fixed Indexed Annuity does!
FIA’s were 1st introduced in 1995 and have become a popular option for retirees looking for principal protection and opportunity for market like returns.
How do FIA’s work? 1st the insurance company places your money into their high quality bond portfolio. Most are 97% investment grade. These offer contractual guarantees for principal protection. After assuring your principal will be protected they offer the opportunity to gain interest in the form of an option. If the market does well you get a portion of the gain which is usually about 60 to 70% . If the market goes south you do not participate in the losses and your principal is protected.
Let’s say you placed $100K into a FIA. The 1st year you saw the market go up 10% and you captured 60% or 6%. Now you have $106,000 at the start of year 2. Let’s say the market goes up another 10% and you get another 6% and now have $112,360. In year 3 the market drops 10%. Here is the really cool part. Because each year your gains were immediately taken out of the market and your original 100K was never in the market you still have $112,360 in your account.
In addition, the FIA’s also offer up to 10% signing bonuses, 10% penalty free withdrawals, terminal illness and convalescent facility riders plus now guaranteed income riders that pay up to 8% if used for income purposes.
So now you know, how to find safety and opportunity at the same time!
Fixed Indexed Annuities.
For more retirement information from Bill Demaree visit demaree.retirevillage.com