Services: Annuities
Indexed Interest Potential
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Benefits of Annuity Income
Utilizing fixed-indexed annuity (FIA) income in retirement has numerous advantages. You can protect the money you’ve worked so hard to save with an FIA. It can also be used to provide a reasonable rate of return** based on the performance of a market index. The insurance provider safeguards your funds. So, even in the case of a decline in the stock market, you will not lose your money. However, if the market is trending upward, you may be able to earn interest at a higher rate. Annuity income increases the confidence of many retirees in their retirement strategy.
Crediting Method
When you purchase a fixed indexed annuity (FIA), you choose the index or indexes to apply to the annuity’s value. Additionally, you have a choice in the crediting method. For example, you might choose an annual or a monthly crediting method. Certain crediting methods make use of a value averaged over time. Conversely, some methods base the annuity’s interest on the variation in rates over time. Alternatively, the index front change from the first anniversary of the contract date may serve as the basis for the crediting method.
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What Affects Interest Rates
It’s important to take into account the various factors that impact your FIA’s interest rate. These include:
- The cap is a ceiling on the amount your FIA can earn during a certain period. If your chosen index increases over the cap, the cap is then used to calculate your interest instead of the index rate.
- The participation rate is used to measure your interest rate, and is typically implemented after the cap but before a spread.
- With a spread, the index deducts a percentage of interest over a certain amount of time. For example, if the spread is 5% and the index increases by 9%, the annuity contract would get a 4% indexed interest credit.