Indexed annuity accounts credit interest based on the performance of chosen stock and bond market indexes, however they are not variable in nature and have no direct market exposure. This simply means that when the market goes down, there is no risk of losing your invested principal or interest gains from previous years.
During the past twelve months, the markets have performed well and this is good news for those who own an indexed annuity. Many accounts have produced returns of 15%-20% or greater over the past year.
Indexed annuity owners are most reassured by the fact that their earned interest gains cannot be lost in subsequent years if/when the market corrects again.
If you have owned an indexed annuity over the past decade, then you have experienced first hand the above average growth, reliability, and safety these accounts provide.
The stock market has twice corrected significantly over the past ten years causing massive losses for investors on both occasions.
Indexed annuities don’t participate in down years however. The worst return you can experience is one that is 0%, but nothing below that number.
But when the market performs well, like it has over the past twelve months, then these accounts can credit significant interest to your principal. Assuming that the interest is not withdrawn, it becomes part of the principal and the account resets for the next year. If the interest is needed, then most annuities allow for a 10-20% annual withdrawal.
Indexed annuities are quite popular for those in need of safe monetary passage during or near retirement. Too much wealth has been lost over the last decade and annuity products offer a secure alternative to the unforeseen risk associated with the stock market.
It is important to understand that returns will vary from policy to policy depending on factors such as the anniversary date of the contract, index account chosen, as well as the spreads, caps and/or participation rates offered by the annuity provider.
It is important to work with a knowledgeable annuity agent before investing so that you know what to expect from your policy. There are several moving parts associated with these accounts and some are simply designed to return higher interest than others. You should review your account each year on its anniversary with your agent so as to maximize its potential.
Any investment that offers potential returns over 15%, avoids market losses, and protects both the principal and earned interest each year can be a very wise choice for cautious investors. You may have investment dollars sitting on the sideline that you no longer wish to be exposed to significant downside losses.
If you have placed your investment dollars in CD’s, money market or other fixed income accounts to avoid losses, but you still desire the opportunity to experience double digit growth, then you may want to consider an indexed annuity account.
We are an independent annuity marketing agency licensed with several providers. We offer a wide array of indexed annuities for our clients depending on your needs, goals and investment time horizon. Contact us today to learn more about your indexed annuity options.