Written By: Jeremy Smith | Amerishield
A happy fixed indexed annuity owner has been properly educated and appreciates its value. If you look at statistics and numbers written on a piece of paper, some annuities aren’t as attractive as other investments might appear to be. Appreciation of the value of a fixed indexed annuity is based upon the individual’s personal retirement goals.
Low Risk vs. High Growth potential
Many people looking at products for investment purposes seem to be very optimistic about how they want their money to work for them. They ignore risk when determining what may be the best choice for them. When that occurs, the potential value of a fixed indexed annuity is reduced when high growth potential is the goal.
A happy fixed indexed annuity client understands avoiding the risk of losing their retirement savings is a priority over high potential gains. They want strong guarantees in place to prevent loss of principle. This goes back to concept in my article “The Tortoise and the Hare” previously published August 3, 2012. Fixed indexed clients are looking for consistent growth over time and the protection of principle at all times. This is ideal for retirees who can’t afford to gamble with the money that will carry them through retirement. They know their money will be there for them during their golden years.
Another reason that fixed indexed annuity owners are happy is that fees are extremely rare. Variable annuities on the other hand can have fees as high as 5% annually. If the index goes up 4% on a fixed indexed product with a cap of 4%, you receive the full 4% at the end of the crediting strategy because there are no fees. If you owned a variable annuity and your portfolio sector went up 4% with 5% in annual fees, you would have lost -1% of your principle. Your sector would have to grow 5%, every year, just to break even and protect your principle. Fixed indexed annuity owners are happy even in a down year because their principle loses no value due to the contract guarantee.
- Income Rider: Allows the premium to grow in a separate account at a minimum guaranteed rate that will be available to be used to generate lifetime income when the owner wants to begin taking it so they will never outlive their money.
- Death Benefit Rider: Allows the premium to grow at a separate guaranteed minimum as a death benefit when the owner dies. This can be useful if the owner is taking RMD’s and wants to leave a legacy to their beneficiaries.
Jeremy Smith is a Featured Advisor with Annuity123. AmeriShield agents discuss your complete insurance and risk tolerance as well as your goals for retirement and what you plan for your insurance products to do for you and your family before we discuss any products with you. We fully educate you on the differences in the types of fixed and indexed annuities that meet your specific situation and offer you “The Power of Choice” to achieve your goals.
Note: Any information in this blog is not and should not be construed as investment advice.