The Best Fixed Index Annuities (FIA)
Unfortunately, fixed index annuity aka hybrid annuity performance is often overstated as giving full market returns with no market risk to principal. It is true in specific periods they do equal or beat the market. However, that is not always true. In a strong economy with stocks doing well, it is expected that the fixed index annuity will fall several percentage points behind the market return; however, an FIA with a 4% to 7% interest earned return and no risk to principal for many retirement plans would be considered a win-win strategy.
**Guarantees, including optional benefits, are backed by the claims-paying ability of the issuer, and may contain limitations, including surrender charges, which may affect policy values. During this segment, Dick and Eric are referring to Fixed Annuities unless otherwise specified.
FIAs are annuity contracts between you and a life insurance company. They are simply a fixed annuity that is linked to the performance of a stock market index, commonly the S&P 500, Dow Industrials or the NASDAQ. An FIA has a **guaranteed minimum rate of return (**guaranteed by the insurance company and not the FDIC), and it gives you the ability to capture a portion of stock market gains with no market losses. That’s the upside. Overall, FIAs are not designed to beat the stock market even though many have from 1999 through 2010. They are basically designed to outperform the fixed markets such as CDs, money markets and bonds.
Fixed index annuities were first introduced in the U.S. about 20 years ago as an alternative to mutual fund^s, allowing growth from stock market indexes with to principal in loss years. The first offerings of these annuities were readily accepted and caught on quickly. The rest is history. Cash inflows to fixed index annuities have exploded from approximately 3 billion in 1997 to over 26 billion by 2008. During the financial crisis of 2008-2009, money flowed into these annuities so fast that many carriers actually stopped taking new clients. According to the Wharton study, many fixed annuities that incorporate indexing have proven (to the critics’ surprise) to give higher returns over several recent five and ten year periods of time than the index benchmarks they are crediting from.
A fixed index annuity, index annuity, ratchet annuity or equity indexed annuity is actually and simply a fixed annuity with an optional or an extra feature. And, in addition to having a fixed interest rate choice, it also has an optional interest crediting method that uses an external market index to determine the amount of interest to be applied after a specified term of typically one year.
Today's Top Ten Fixed Annuity Rates (MYGA)
Important things to consider when choosing a fixed indexed annuity are:
- High independent ratings for safety concerns
- High interest crediting for growth
- Generous payouts for income
- More liquidity for emergency cash needs
- Shorter surrender periods or lower surrender penalties
- Additional benefits such as payouts for long term care, terminal illness and death benefits
- Flexible income riders that allow both lifetime income and the ability to pass any remaining account value to heirs
- More indexing options for higher growth potential
- Better indexing strategies for higher growth potential
- Higher cap rates, higher participation, higher averaging
- A larger bonus
- No or low annual fees
- Shorter vs. a longer reset to grow and protect accumulation
- High water mark vs. annual point-to-point
- Higher deferred growth of the income base
- Availability of the income base for a death benefit
- Joint survivor income **guarantees
There are many considerations that may be relative to your situation. What fixed index annuity works best for a 50-year-old single mother may be a total disaster for you and your wife. It is important to understand that no one fixed index annuity will give you everything you need or want. So, it is necessary to prioritize your needs. List all of your preferences and needs and then prioritize them on a scale of 1-10; 1 being the least concern and 10 being the greatest. Now start the process of comparing rates and options from top companies until you find the best overall fixed index annuity to address your unique situation. Utilizing a financial planner/educator can be of great value once you have familiarized yourself with the basic aspects of fixed index annuities.
Fixed Index Annuity Performance Benefits
- Safety: Backed by highly rated state regulated insurers
- Tax Deferral: Tax-deferred growth
- Higher Return: Better interest rate potential than CDs and standard fixed annuities
- Life Insurance: Death payout **guarantees
- Liquidity: Flexible withdrawal privileges
- Unlimited Contributions, unlike IRAs and 401(k)s
- Inheritance: Pass money directly to heirs bypassing probate
- Lifetime Option: Income you can’t outlive (Annuitization or a Living Benefit Rider)
Fixed Annuity with Indexing Options (FIA) Aka (EIA) Equity Indexed Annuity
- Lump-sum or periodic contributions
- Invested in mostly high quality A-AAA bonds
- Annual interest crediting risk. Insurance company **guarantees principal
- Higher rate potential based on index performance (such as S&P 500, Dow Jones, NASDAQ, etc.)
- Moderate growth
- 4% to 8% interest crediting potential varies with index performance
- 3 to 10 year term typical
- Sophisticated, greater potential
- Guaranteed retirement income options
- Annual fees, minimal to none
Fixed Index Annuity Performance Summary
All fixed index annuities are tax-deferred with no income tax requirement until withdrawal. This is a definite advantage over many investments like bank instruments, mutual fund^s, stocks and bonds when considering a long term retirement investment. A long term fixed index annuity acquisition may consistently outperform banking products, bonds and treasuries. Reinvesting money that would otherwise be paid out in tax over an extended period of years is always an advantage. In addition, fixed index annuities have several benefits that can be important for retirement planning.
Question: When the stock market drops by 35% in one year, how much of that 35% can your $553,000 fixed index annuity drop in value that same year?
Answer: It cannot drop at all. That’s a key advantage – principal and past accumulation are **guaranteed against market risk! Another advantage is that index gains reset to the new low point of the market as its new floor to compute new annual gains from for its next year it does not have to exceed the original high point before gains are computed. This strategy works well in flat, down and volatile markets.
Using OutCome Based Planning™ for Your Retirement
We practice and recommend a "Holistic - OutCome Based Planning™ process when considering annuities." This approach has the effect of balancing your overall portfolio so you can meet your retirement objectives by "first identifying the least amount of your investments or savings (if any) that should be considered for annuities." OutCome Based Planning™ analyzes and models multiple outcomes so you can clearly identify your best income and growth opportunities.
"The Annuity Guys will only call if you request help". Hence, when you are ready for specialized help we will be available."Working with an Experienced Fiduciary Financial Planner can help you Avoid a Trial & Error or Risk Based Retirement"
This type of approach does take considerably more time, effort and analysis which will show you mathematically the successful possibilities by comparing various outcomes rather than trying to sell or convince you of that "so-called one best solution." Clients frequently tell us that this process removes some of the confusion and emotion to help them objectively identify a better retirement plan; rather than just ending up with the most convincing salesperson or advisor.
When requesting help you can be assured of working with an experienced Annuity Guys' Retirement Planner who is independently insurance licensed and securities licensed as a fiduciary financial planner having access to the vast majority of annuity companies in helping you choose the best annuities using a holistic-outcome based planning approach. We consider the high quality advisor recommendations we make to our website visitors as a direct reflection back on our commitment to serve all client's with a high standard of excellence in financial planning for retirement.
Based on survey feedback on advisors from our website visitors, we eliminated about two-hundred local advisors and now only recommend a few that we consider experienced vetted Annuity Guys' Fiduciary Advisors. Many local advisors continue requesting us to recommend them as a vetted advisor. However, our reputation and future business is driven only by satisfied website visitors. So, unfortunately we've had to tell the vast majority of local advisors no, since we changed our business model four years ago. At that time we stopped trying to satisfy everyone with local advisors, we now primarily work with individuals who are comfortable using today's internet technology to their fullest advantage by working with a select group of vetted, experienced and knowledgeable Annuity Guys' Fiduciary Planners.
Selecting the Best Annuity & Retirement Income Advisor
Are you willing to work with one of our retirement and annuity advisors based on their experience and expertise as a first priority rather than being limited by a local or regional area? The good news is that technology has forever eliminated our geographical limitations and leveled the playing field for everyone! As a result of today's technological advances, all of us can now work confidently with experts in any field including personal finance. We are no longer confined by regional or local boundaries limiting our choices and ultimate success. A high quality advisor is now as close as a click or phone call away.
"There is no room for trial and error when it comes to choosing MarketFree® Annuities or a Successful Retirement Planner."
"There are no undo buttons in retirement so it is vitally important that you do it right the first time!"
We are fortunate to have a select few who we believe are truly the highest qualified advisors out of about two hundred licensed insurance agents that we eliminated. Your survey feedback is what helps us make these tough decisions. Our advisors have an independent financial practice, specializing in annuities and retirement planning, which helps ensure that you are given the best options available for your retirement planning.
"It takes an experienced expert to know how to structure annuities for income, inflation, growth, return of principal, and tax advantage."
"Anyone can sell you an annuity; however, it takes a truly qualified and experienced advisor to know how to structure them for income, inflation, growth, return of principal, and tax advantage. Typically, there is not just one that can accomplish all of these objectives. It is how an advisor structures multiple annuities in balancing your total portfolio that makes it possible to achieve your most important retirement objectives."
Why Searching for the Best Annuities on Your Own Can be so Frustrating...Almost everyone nowadays turns to the internet for answers on everything - from buying new widgets to researching just about everything under the sun; and finding the best annuity is no exception!At first, it may seem that researching will be straightforward but the more time you spend researching them, the more frustrating it can be. Why is this? First of all, it does not take long to realize that gimmicks abound - such as warnings and alerts from salesmen who just want your attention so they can sell you one or the "too good to be true" claims of 8% to 14% **guaranteed interest and of course the claim that you can get the full market upside with no downside risk! If you have done any research you have heard all of these claims in advertising which are mostly half truths and not fully explained.So how can you find the best annuities on the internet? The truth is... you can't! And what is even more frustrating is all the conflicting points of view from so called experts. There are well over 6,000 different annuities - all designed for different reasons, so is it any wonder that the deck is stacked against the average researcher or do-it-yourselfer. Add to that the fact that they pay high enough commissions to attract a plethora of both good and bad agents. This does not make annuities good or bad; they are simply a financial tool that truly benefit those who use them correctly.How can you find the best annuities for your unique situation?
- Use the internet cautiously;
- Work with a vetted and experienced specialist;
- Do not settle for that one dubious best plan. Compare multiple Outcome Based Plans to decide on the one that is truly best for you;
- Be keenly aware of scare tactics and hyperbole - avoid those advisors and websites;
- Avoid websites that are focused on rushing free reports, rates and quotes to get your contact information they are rushing you to speak with them, instead, take your time and choose someone you are more comfortable with that works on your time-table;
- Know the Five Vital Factors (listed above) that an experienced specialist must answer before helping you select the best options for your situation;
- Watch this telling video "Avoid Annuity Gimmicks, Amateurs and Charlatans"...
** Guarantees, including optional benefits, are backed by the claims-paying ability of the issuer, and may contain limitations, including surrender charges, which may affect policy values. Annuities are not FDIC insured and it is possible to lose money.
They are insurance products that require a premium to be paid for purchase.
Annuities do not accept or receive deposits and are not to be confused with bank issued financial instruments.
During all video segments, Dick and Eric are referring to Fixed Annuities unless otherwise specified.
*Retirement Planning and annuity purchase assistance may be provided by Eric Judy or by referral to a recommended, experienced, Fiduciary Investment Advisor in helping our website visitors. Dick Van Dyke semi-retired from his Investment Advisory Practice in 2012 and now focuses on this website. He still maintains his insurance license in good standing and assists his current clients.
Our vetted and recommended Fiduciary Financial Planners are required to be properly licensed in assisting clients with their annuity and retirement planning needs. (Due diligence as a client is still always necessary when working with any advisor to check their current standing.)
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- MarketFree™ Annuity Definition: Any fixed annuity or portfolio of fixed annuities that protects principal / premium and growth by remaining market risk free.
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