Darcy Bergen |
According to Darcy Bergen, a discussion about the indexed annuity is fixed a traditional annuity is in order if you want to get the maximum benefit from your money. The indexed annuity can earn higher returns than the fixed annuity, but the participation rate is reduced. For example, if the index gains 10%, your participation rate will only be 12 percent. For this reason, you should be aware of rate caps when comparing fixed and indexed annuities.
For those who want to accumulate money for retirement, fixed index annuities offer a guaranteed income and a tax-deferred growth period. This is especially useful when you are still young and would like to benefit from lower tax brackets after retirement. These products are also suitable for people who want to invest money during their early years and still take advantage of low market prices. However, they do come with a higher surrender charge. In order to understand how indexing works, you should read an Investor Alert published by the Financial Industry Regulatory Authority. This document explains the various types of indexing and what effect they have on the contract's value. The Financial Industry Regulatory Authority (FINRA) has provided a simple guide on indexed annuities, which can be helpful in your discussions with your clients. This article also outlines some of the benefits of indexed annuities and the disadvantages of fixed annuities. Darcy Bergen pointed out that fixed indexed annuities offer a guaranteed minimum income stream and growth potential based on an index (S&P 500 index, for example). The benefits of fixed indexed annuities include tax-deferred growth and lower risk and potential returns. With fixed indexed annuities, you'll never be exposed to the volatility of the stock market. The indexed annuity also offers the added benefit of guaranteed death benefits and lifetime income. Fixed indexed annuities have surrender charges and market-value adjustments. Withdrawals over ten percent of the value of the annuity will be subject to surrender charges. Depending on the carrier, surrender charges can range from ten percent to as much as fifteen percent. However, these penalties typically decline by about one percent a year. If you wish to take your money out before age 59 1/2, you will have to pay a 10 percent penalty. Using index annuities is advantageous when you want to pass assets on to your beneficiaries. Many carriers allow you to add optional riders to increase the value of your life insurance policies. Spousal continuation is usually available and some carriers offer joint insurance. Both types of annuities can offer growth potential, and you can select which works best for your situation. However, you should consult with an investment professional to determine which combination of fixed annuities will maximize your return. Darcy Bergen described that there are several factors to consider when comparing fixed and indexed annuities. Fixed annuities may be the better choice for someone with limited knowledge of the stock market. An equity-indexed annuity is typically tax-deferred and increases in value as stocks increase. This increased yield also provides a hedge against inflation. But you should keep in mind that the gains will be limited and not reflect the full increase in value of the stocks. Furthermore, fees can reduce the value increase of the indexed annuity. Fixed annuities are not as flexible as indexed annuities. They have a lower participation rate and are subject to cap rates and rider fees. You can get a guaranteed minimum income by adding a rider to your fixed annuity. Generally a guaranteed minimum income benefit rider is available in an indexed annuity and will not affect the principal value unless you withdraw it. While fixed annuities are the safer choice for investors, indexed annuities are more flexible for many investors. You can take advantage of the benefits of both types and maximize your investment by choosing the right one for you. But before choosing between fixed and indexed annuities, make sure you understand the difference between the two. And don't forget to compare the fees and features of both. After all, these two will be the most important decision of your life.
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