For federal workers who have diligently socked away money in their Thrift Savings Plan (TSP), it’s always a good idea to start diversifying your investments to reduce risk as you get close to retirement. One option is using TSP funds to purchase an FIA.
What Is An FIA (Fixed Indexed Annuity)?
An FIA is an insurance product that establishes a contract between you and a private sector company that provides you guaranteed income for life. As with other types of insurance, you’ll pay a premium. However, with an FIA, you’ll eventually stop making premium payments and your annuity will start paying you. Also known as a Hybrid Annuity, it 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. If your index performs well, the value of your annuity increases.
“If you’re worried about the cost of custodial Long-Term Care (LTC) in a nursing home, an FIA offers an alternative to LTC insurance – no health exam required.”
3 Reasons To Purchase A Fixed Indexed Annuity
An FIA may be a good fit for your retirement if any of the following describe your concerns:
- If you don’t want to risk the uncertainty of the stock market, an FIA can help preserve the principal value of your investment.
- If you’re afraid of outliving your money, an FIA can provide another stream of lifetime retirement income.
- If you’re worried about the cost of custodial Long-Term Care (LTC) in a nursing home, an FIA offers an alternative to LTC insurance – no health exam required.
4 Advantages Of A Fixed Indexed Annuity
In the aftermath of the 2008 stock market crash, retirement accounts lost an estimated $2.8 trillion. Now, if you can afford to stay the course and wait until the market rebounds; good for you. However, if you can’t afford the risk, consider these advantages:
- Protection From Stock Market Volatility: since FIAs do not have any underlying investments, you won’t lose money due to a stock market downturn.
- Your Money Continues To Grow Tax-Deferred: your earnings and interest accumulate tax-free until the money is withdrawn.
- Guaranteed Lifetime Income: you get a guaranteed stream of retirement income for as long as you live.
- 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.
- A Probate-Free Legacy For Loved Ones: with an FIA, you can leave a cash inheritance for your named beneficiaries and avoid the probate process.
Before you purchase any type of annuity, connect with an FRC® trained advisor to review your options.
