Let’s start by eliminating any potential confusion: this article is not about your FERS/CSRS pension which is often referred to as an annuity. And, just to be clear, it’s not about the TSP Annuity offered to federal workers.
A Fixed Indexed Annuity is an insurance product that establishes a contract between you and a private sector company that promises to provide you with guaranteed income for life. As with other types of insurance, you’ll pay a premium. However, with an annuity, you’ll eventually stop making premium payments and your annuity starts paying you.
“If there’s a stock market downturn, you don’t lose money because fixed indexed annuities have no underlying investments.”
A Fixed Indexed Annuity, also known as a Hybrid Annuity, offers a minimum guaranteed interest rate combined with an interest rate linked to the performance of an outside index such as the S&P 500. It also guarantees a minimum return. If your index performs well, the value of your annuity increases. If there’s a stock market downturn, you don’t lose money because fixed indexed annuities have no underlying investments.
Advantages Of Fixed Indexed Annuity
- Grows Tax-Deferred: earnings and interest accumulate tax-free until the money is withdrawn.
- Guaranteed Lifetime Income: a guaranteed stream of retirement income for as long as you live while protecting your accumulated value against stock market volatility.
- Riders & Contract Provisions: a range of annuity riders can be added to your contract to address your needs – from death benefits to long-term care.
- Probate Free: an annuity enables you to leave a cash inheritance for your named beneficiaries and avoid the probate process.
Reasons To Purchase A Fixed Indexed Annuity
Before you purchase any annuity, it’s important to make sure it aligns with your long-term financial goals. With this in mind, a Fixed indexed Annuity may be right for you if:
- You don’t want to risk the uncertainty of the stock market, it can help preserve the principal value of your investment.
- You want the peace of mind you can get with a stream of retirement income that’s predictable and guaranteed.
- You want an alternative to long-term care insurance policies or life insurance.
Remember — different types of annuities serve different financial goals. Some are designed for retirees willing to take on risk to generate more growth and profits. Others are designed for those who have a lower risk tolerance and don’t want to take a chance with their regular payouts. Connect with an FRC® trained advisor who can help you decide if a fixed indexed annuity is a good fit for your retirement.
