Indexed Annuities- How Do They Work?
Well, Annuities are unique in the entire financial world. They are the only products that allow you to plan retirement that can guarantee a lifetime of income – no matter how long that lifetime is! In addition to that there are many other features that make them the “Ideal Financial Product” for many people. Among these are:
- Tax- Deferred Growth
- Preservation of Premium
- Minimum Guarantees
- Possible Probate Avoidance
- Guaranteed Lifetime Income
Depending on the company and product being offered there are many other unique advantages available also. To go back to the “Casino Story” a Fixed Indexed Annuity with a 10% Bonus and an 8% Income Rider would perform just like the game set up in the story!
Now when you add the power of an optional Income Rider to the existing benefits of a Fixed Index Annuity you have the complete package unmatched in the financial world! You have guarantees of principal, annual step-up to lock in any upside gains, bonuses of up to 10% on your money credited from day one, guaranteed growth of up to 7% compound interest on your income account, and a guaranteed income for life that you can never outlive. Take a look at this short 5 minute video that describes how income riders work.
This Calculator can tell you how much your account can grow for lifetime income.
To wrap up this summary of Annuities consider these 5 benefits:
1.) You can pay less taxes – With taxable alternatives you must pay taxes on earnings whether you take the earnings out or not, with annuities you only pay taxes when you actually take the money out.
2.) You can have more money with an annuity than a taxable alternative because earnings accumulate 3 ways inside an annuity:
a.) earnings compound on top of principal
b.) earnings compound on top of earnings
c.) earnings compound on top of dollars normally sent to the IRS.
3.) You can have 4 ways to withdraw your money:
a.) 10% penalty-free withdrawal each and every year
b.) surrender your policy- surrender charges may apply
c.) annuitize for monthly income- lifetime payouts
d.)***utilize the optional Income Rider for guaranteed income account growth, maintaining access to your remaining principal and guaranteeing a lifetime income!
4.) You can take advantage of the unique tax advantages of a non- qualified annuity.
It “picks up where your IRA leaves off”! Like your IRA, it grows tax-deferred, income tax is paid when interest is withdrawn, and there is a 10% penalty for withdrawals before age 59 1/2. Unlike an IRA however, there is no maximum limit as to how much you can put in your non-qualified annuity and there is no forced withdrawals beginning at age 701/2!
5.) You can select how your earnings could potentially grow.You can have an interest rate guaranteed for one or more years, or you can tie your growth to the performance of various Indexes (like the Dow, S&P 500, Euro Stoxx 50, Russell 2000 etc.).