Indexed Interest Potential
There are many benefits of fixed indexed annuities (FIAs) that can help you in retirement. With an FIA, you can keep the money you worked hard to save safe. This, while earning a reasonable rate of return** based on the performance of an index.
Benefits of Fixed Indexed Annuities
The insurance company keeps your money safe. You won’t lose your money in the event of a stock market drop. But, when the market is on the rise, you can gain potentially higher interest. For many retirees, this setup gives them more confidence in their retirement.
Your Crediting Method
When you buy an FIA, you have a choice of indexes to allocate to the annuity’s value. And, you can choose which crediting method is used. For example, you can choose a monthly or annual crediting method. Some methods use an average of value over a period of time. Another, meanwhile, bases interest on the difference in rates over a period of time. Or, the crediting method may be based on the change of the index front from the first-anniversary contract date.
What Affects Interest Rates
It’s important to examine the factors that impact the interest rate on your fixed indexed annuity. These include:
- The cap is a ceiling on the amount your FIA can earn during a certain time period. If your chosen index increase goes over the cap, the cap is then used to calculate your interest instead of the index rate.
- The participation rate, implemented after the cap but before a spread. The participation rate is used to measure your interest rate.
- And a spread, which deducts a percentage from the accumulations of the index reaches within a set term. For example, if the spread is 4% and the index increases by 9%, the annuity contract would get a credit of 5% indexed interest.