So what exactly is an Index Annuity, and are they competitive with other Annuity Rates?
Annuity rates
Index annuities have become popular in discussion circles about retirement planning. Whenever a product has got the growth the product has had, you should have numerous perspectives on it. Today I would like to discuss what sort of index annuity works, who ought to be utilizing an index annuity, and just how index annuity rates work.
Index annuity rates
Exactly what does index annuity mean?
Essentially it is a annuity which is made to be capable of share with a few of the upside of the stock trading game index and protecting you against the downside of it, all without playing the stock exchange. Ok what do i mean, sounds confusing I know. I want to explain.
Keep it Simple
Most index annuities have one of two common strategies a cap that permits you to receive an interest credit up to and including certain quantity of the what an index makes, including the S and P 500.For instance in the event the S and P 500 index rises 7 percent and also the cap is placed at 5 percent annually then the most you'll receive for the interest credit is 5%, deposited to your account .What people love about the strategy is that it'll shield you from the problem or sometimes referred to as Floor. So for instance when the stock exchange has a 20% dip the worst you'll make that year is Zero.
The next strategy that has been gaining lots of attention will be the uncapped strategy .Disappears can there be is no cap on how much you may make annually, however it comes with a reduction off of the amount made using the same example as above. If the index which you used made 7% and there was decrease in 2% than you would are making 5% .the most obvious benefit to the uncapped strategy, is at bull markets you can do well .However in flat markets the location where the market is probably not growing just as much it might hold your interest credits down. It will also offer you down side to this protection or a floor, and so the the next occasion industry losses 20% the worst you'd make is zero.
Who should use Index Annuities
In my opinion remember that annuities needs to be purchased for his or her guarantees they provide meaning ,protection of principal, income forever, long-term care and legacy .the situation which i see with many people buying index annuities may be the get them for the pixie dust or some fantasy .They think they are buying some new hot stock .It's not a stock it doesn't perform just like a stock, it provides the ability in most cases being somewhere within a bond and a stock .With all the current above being said nothing can touch for me the guarantees annuities can offer. We live in a country where most people are living longer where lower than 15% of people have pensions. Never has there been a larger need of annuity planning than now. Unfornately instead seeing the importance of that need most people purchase the sizzle and end up forgetting the best part the steak (guarantees) that annuities provide.
Final Analysis
We've touched only the the surface of what index annuities can perform for you personally .I do think that they have taken annuity planning to a higher level. Something In my opinion was greatly needed in the field of retirement income planning. Make absolutely certain that whenever you are considering using them that you're doing the work for the best reasons, and with someone who understands how they work.