Top 5 Reasons to Consider a Fixed Index Annuity Over Other Annuities
A fixed index annuity is a long term saving option that guarantees several exciting benefits for retirement. One of the reasons to choose a fixed index annuity over another annuity, such as a variable annuity, is the high growth potential with fewer risks of losing your savings in the market. The fixed index annuity is designed to prepare a person for retirement, and has particular tax advantages as well. Let’s start with the basic reasons to consider a fixed index annuity over other annuities.
In a fixed indexed annuity, an investor receives a guaranteed return while in a variable annuity, an investor has to choose the asset to invest. If you invest in a fixed index annuity, your interest will accumulate based on the external index. Your interest will never be lost once added to your annuity contract. However, in a traditional fixed annuity, an investor gets the fixed interest rate for a set period of time. Here are some in-depth reasons to choose a fixed index annuity over other annuities as a part of your retirement plan.
Reasons to Consider a Fixed Index Annuity Over Other Annuities
1. Steady Income for Life
A Fixed Index Annuity is an excellent source of stable income for life, that most other investment annuity lacks. You must know that adding a lifetime income source into your retirement plan is valuable. FIA offers one such practical option to its investors. A steady income source option allows investors to take more risks in their life.
2. Tax-deferred Growth
Fixed index annuities are tax-deferred growth, which means an investor does not have to pay tax on the earned interest until they withdraw their total money. Mostly, investors withdraw their money after retirement when their earnings are low, and therefore they fall in a lower tax bracket. That’s why this annuity is an efficient way to grow and manage taxable income after retirement.
3. Safety from Market Losses
It hurts when we lose our money, especially if it is our savings. And that’s why nobody likes to put their money in a place where they know they can lose it. A Fixed Index Annuity is one of the safest places to put your money without any fear of losing money due to a down market. In this, the insurance company saves a portion of the principal amount in “reserves”. Overall, your money is safe in FIA.
4. Growth Potential
FIA allows you to grow your money rapidly. It has better growth potential compared to other annuities. This means it has an interest rate based on the outside market index. In a year, the interest rate increases based on the increased index, and that interest adds on to the principal amount. If in any year, the index value decreases, the previously credited interest will remain safe in your account.
5. Spousal Opportunities
If any mishaps occur, and you pass away before the withdrawal of annuity, FIA allows the spouse to take scheduled annuity payments. Most annuities lack this benefit. However, some insurance companies provide services only upon the first spouse’s death.