Overcoming the 5 most common obstacles when understanding Fixed Index Annuities
Annuities have come a long way down through the years. Interest rates in the 80’s were so high that contracts issued out throughout the 80’s and even the 90’s paid out nicely due to the market environment at the time. The 90’s came about the variable annuity phase where clients had access to nearly 100% of market upside, but also were exposed to market losses. Right about the turn of the century Fixed Index Annuity products came about and gave clients protection from downside market risk as well as locking-in of their earnings. Fixed Index Annuities (FIAs) can sometimes be difficult to understand, the purpose of this article is to overcome the 5 most common obstacles when understanding these innovative and exciting products.
- FIAs are too complicated and have too many moving parts:
The simplicity of the FIA story is rather simple when looked at the right way because of the benefits they offer consumers. FIAs offer a story many consumers may be looking for: Growth Potential with Protection from Downside Market Risk. Earnings are captured each year and a guaranteed floor is put underneath earnings while charging no fees to the consumer.
- FIA owners’ premium is “locked up” and not accessible:
While it is true that all annuity products have decreasing surrender charges due to the fact that the insurance carriers need to amortize growth within these products overtime by securing their funds for 7 or 10 years, many FIAs have features or optional riders that provide some liquidity when consumers need it the most. Features can range from an annual penalty-free withdraw to a waiver of surrender charges due to qualified nursing home confinement.
- I already have a well-rounded portfolio
Fixed Index Annuities are becoming a household term as a new generation of savers continue to be drawn to growth potential and protection from downside market risk. If you haven’t heard of FIAs yet and are looking to secure your retirement assets you should consider them and ensure you aren’t missing out on a stress-free retirement while still capturing upside movement in the market.
- FIAs are only for risk-averse or conservative savers
The reality is all consumers who want a financial foundation that cannot be lost to due to downturns in the market should be open to FIAs. As a way to protect yourself from downside market risk, FIAs can be a vital part of a balanced financial plan. Millennium offers a variety of FIAs that could work for your retirement depending on what state you reside in.
- FIAs have little or no growth
It’s true that consumers will be giving up some upside potential to have protection from downside market risk. However, the best FIAs offer a variety of interest-crediting strategies to choose from. While most FIA’s average 3-6% growth over the long run, some strategies do not have a traditional cap which could mean higher upside potential during market growth years.
In short, never put all of your eggs in one basket. FIAs are not the only way of creating a secure and stress-free retirement for you and your family, however they are innovative concepts and offer protection while still allowing consumers the ability to capture growth in years that it happens with no fees eating into your earnings. A guaranteed floor underneath your money with no fees? This is what Fixed Index Annuities can create for you, contact us at (206)247-5360 or visit www.millenniuminsurancegroup.com to book an appointment and learn more we’re here to help.
