Indexed Interest Potential
Indexed Interest Potential
Benefits of Annuity Income
There are many benefits to using fixed indexed annuity (FIA) income in retirement. With an FIA, you can keep the money you worked hard to save safe. Additionally, you can use it to earn a reasonable rate of return** based on the performance of a market index. The insurance company keeps your money protected. You won’t lose your money in the event of a stock market drop. But, when the market is on an upward trend, you can gain potentially higher interest. For many retirees, annuity income gives them more confidence in retirement.
Crediting Method
When you buy an FIA, you select an index or indexes to allocate to the annuity’s value. And, you can choose which crediting method is used. For example, you may choose a monthly or annual crediting method. Some crediting methods use an average of value over a period of time. Others, meanwhile, base interest on the difference in rates over a period of time. Or, the crediting method may be based on the change of the index front from the first-anniversary contract date.
Understanding
What Affects Interest Rates
It's important to examine the various factors that impact the interest rate on your FIA. 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.
- And 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.
