Savings Annuities
Savings Annuities, also known as Deferred Annuities, come in three primary forms: Traditional Interest Annuities, Fixed Index Interest Rate Annuities, and Variable Annuities.*
The Traditional Fixed Annuity is the most predictable and conservative of the three product types. TFAs offer guaranteed interest terms of 1-10 years and guarantees of principal from the issuing insurance company. Benefits such as penalty-free withdrawals, annuitization, guaranteed lifetime income, penalty free death benefits and free withdrawals for terminal illness or nursing care provide flexibility.
Fixed Index Interest Rate Annuities (FIAs) are a form of fixed annuity where each contract year you can receive a declared interest rate or an indexed interest rate. Declared rates are set at the beginning of each contract year for that year. On the other hand, indexed interest rates are calculated and credited at the end of a preset term (normally one year). It is important to note that the insurance companies set the crediting formula for indexed interest rates at the beginning of each contract year and cannot change the calculation during the crediting term. FIAs are available with similar liquidity and death benefit provisions to those described for TFAs above. Fixed Annuities have become quite popular over the last few years due to their potential for higher interest rates linked to a stock index (usually the S&P 500) with the principal protection afforded Traditional Fixed Annuities. Even when stock indexes are negative, your account doesn’t lose money due to market volatility.
Note: The cost of the principal protection afforded in an FIA is a limitation on upside interest rate returns in the form of rate caps, participation rates or asset fees.
Variable Annuities (VAs) are registered securities products sold only by registered representatives of FINRA. These products differ significantly from TFAs and FIAs in that the consumer bears the full investment potential and risk of the underlying investments. VAs, sold only by prospects, are too complicated to explain on this site.
Finally, a major potential benefit of all three types of Savings Annuities is tax-deferred accumulation of gains. Annuities allow you to keep control of all of the earnings on your savings until you’re ready to use them. Then you choose when and how much to withdraw from your annuity and pay income taxes on.
To learn more about the benefits of a Savings Annuity for your retirement needs, call our office today for a complimentary analysis.
* Note that all products discussed are issued by life insurance companies and should only be purchased after a thorough review and discussion with your agent of all sales materials, disclosures, and/or prospectuses where appropriate. Significant surrender charges for early withdrawals could be applied to all products including Market Value Adjustments (MVAs).