2018 Florida Best Fixed Index Annuity
A fixed index annuity (FIA) offers a unique combination of benefits that can help you achieve your long-term goals.
An FIA is an insurance contract between you and the issuing insurance company. The insurance company is guaranteeing your principal, and backing your principal payments with their assets. They make these guarantees based upon the claims-paying ability and financial strength of the issuing insurance company.
No other product offers the tax deferral, indexed interest potential, and optional benefits to protect your retirement assets and income.
Let’s take a closer look at the three key benefits of fixed index annuities: tax deferral, indexed interest potential, and protection.
Under current federal income tax law, any interest earned in your fixed index annuity contract is tax-deferred. You don’t have to pay ordinary income taxes on any taxable portion until you begin receiving money from your contract. Withdrawals are taxed as ordinary income and, if taken prior to age 59½, a 10% federal additional tax may apply.
Indexed Interest Potential
Fixed index annuities provide an opportunity for potential interest growth based on changes in one or more indexes. Because of this potential indexed interest, FIAs provide a tailored potential for accumulation. And since the interest your contract earns is tax-deferred, it may accumulate assets faster. In addition to potential indexed interest, FIAs can offer you an option to receive fixed interest.
Fixed index annuities offer you a level of protection you may find reassuring. That protection can benefit you in three separate ways:
- Accumulation: Your principal and credited interest are protected.
- Guaranteed Income: You can be protected from the possibility of outliving your assets.
- Legacy: If you pass away before annuity payments begin, a fixed index annuity may help you provide for loved ones.
Also Fixed Index Annuity offer full protection of principal; index gains are permanently locked in when the index option expires; can potentially provide better rates than CDs; with attached income riders, FIAs are an efficient way to contractually plan for future income needs; and some income riders also offer confinement-care type benefits, which can be used as a supplement to traditional long-term care coverage.
Who should consider using them?
All that considered, investors who want to protect their principal and who are OK with CD-type returns should consider FIAs. FIAs are also an efficient delivery system for income rider guarantees for future income needs.
What you should ask before buying an FIA
- What is the FIA’s guaranteed minimum investment return? (e.g., 3%)
- What is the portion of my investment that will be returned over the life of the FIA? (e.g., 90%)
- Which index will the FIA track? (e.g., S&P 500)
- Will the index tracked return include or exclude dividends?
- Will the return be calculated upon the index’s growth (or loss) each year, each quarter, or some other period?
- What portion, called the participation rate, of the index’s return will be credited to the FIA investor?
- How many years is the FIA investment for?
- What is the early exit penalty?
- What is the Comdex ranking of the carrier?
- What is the shortest surrender charge FIA available?
- What is the “renewal rate” history of the issuing carrier? (In other words, is the carrier fair with their index option pricing?)
- Would a multi-year guarantee annuity (MYGA) be a better alternative?
- If I’m planning for income later (target-date income planning), what are the guaranteed income rider contractual details?
Recent innovations like fixed indexed annuities allow for growth in relation to an index, but the owner is protected from loss of principal if the index falls. With people living much longer and pensions quickly becoming a thing of the past, annuities can help provide income throughout retirement without the fear of running out of money.
If you are considering the purchase of an annuity, it’s important to speak with a financial professional who understands them, and can explain the fine print of an annuity contract.
Contact your personal financial advisor at Mintco Financial if you have questions about annuities.
Mintco Financial has offices in Florida and New York to better serve you.
New York 716-565-1300
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