How a combination of powerful annuity benefits can keep you on rack for retirement planning success. We look at five top index annuity benefits: principal protection, tax deferral, liquidity, guaranteed income and beneficiary payments.
In a relay race, the strength of the group is greater than the sum of the individual athletes’ abilities. For each leg of a relay race, one team member uses their particular strengths to help position the next for success. By utilizing one another’s skillsets, the group outperforms any individual. Perhaps unsurprisingly, this is why the world record for the 4×100-meter sprint relay is more than six seconds faster than the individual 400-meter dash.1
A sound retirement plan can resemble a relay. Each phase, or leg, has its own needs that demand their own strategy or product strengths to best build, sustain and deliver financial solutions. As part of a comprehensive plan, products like fixed index annuities offer a suite of unique benefits that work in concert to help you reach your retirement goals.
Below we highlight five key fixed index annuity benefits that they may fit your strategic approach.
A central benefit of fixed index annuities is a level of protection that underpins the product’s guarantees.
When you purchase a fixed index annuity, not only is your principal protected, so is any interest credited to your contract. No matter what the index does, your return will never be less than zero due to index volatility.
- Tax Deferral
Throughout the accumulation phase, money can grow tax-deferred. This means, while your principal and any interest credited are protected from volatility, the tax-deferral benefit provides the opportunity for compounded growth over time—further bolstering your resources for when you choose to take an income.
- Liquidity Options
A sound retirement plan accounts for both expected and unexpected expenses. As a component of a strategic income plan, a fixed index annuity provides added income flexibility through a variety of liquidity options.
Fixed index annuities offer liquidity features that give access to the contract value. Typically, 10 percent of the annuity’s value annually is available for free withdrawal during the surrender charge period. Many products also have increased or full access to the contract value for qualified care needs.
- Guaranteed Income
A retirement-readiness research study by the Indexed Annuity Leadership Council found 78 percent of workers are looking for lifetime income in retirement. This goal is followed closely behind by 76 percent who are looking for stability of income.2 A fixed index annuity can help you reach these goals.
Once the accumulation period ends, you can begin receiving distributions from the guaranteed income sources you generated. You can choose to receive a lump-sum payment, fixed amount payments over time, or annuitized payments for life.
With an income rider option, you have additional flexibility for guaranteed lifelong income payments. These fail-safe measures can be added to a fixed index annuity contract, securing payments that cannot be outlived, with joint payout options for a spouse.
- Take Care of Loved Ones
In addition to helping generate and sustain a stable income throughout your life, with fixed index annuities you can also establish a clear transition of assets to a named beneficiary.
Whether death occurs during the accumulation or distribution phase of the annuity, the annuity guarantees direct payment to the named beneficiary. Depending on the contract, these payments may be in the form of a lump-sum, series of payments or lifetime payments. The contract may also help bypass probate, saving time and expense in the process.
Benefits You Can Rely On
Any of these benefits on their own are important in retirement. But, it is their interdependent strengths that can help fund retirement from start to finish. Developing a strategy with the guaranteed benefits of a fixed index annuity can go a long way in establishing a little certainty into an often uncertain process.
1. IAAF World Championship Results, 4×100 Metres Replay Men-Final, London (37.41s) 2017; compared to IAAF World Records 400 Metres, Rio de Janeiro, (43.03s) 2016
2. Indexed Annuity Leadership Council, The State of America’s Workforce: The Reality of Retirement Readiness. White Paper, 2018
Other retirement solutions may also support similar goals. Guarantees are based on the financial strength and claims paying ability of the insurance company and are not guaranteed by any bank or insured by the FDIC.
The information provided is for educational purposes only and does not constitute advice. For specific details on how this may apply to your personal situation contact your personal financial advisor or insurance agent for more details.