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In recent years, fixed index annuities (FIAs) have become more popular than ever and, at the same time, have moved to the center of controversy among investment-minded individuals.
In reality, an FIA can be a valuable part of an overall investment portfolio and is especially good for long term goals like ensuring retirement income that can last for decades. But you also have to know the ins and outs of the way FIAs work and how to select and customize your best overall plan.
Here are 7 top tips for those looking for the right fixed index annuity option as we move into 2020:
1. Choose Fixed Index Annuities Over Variable Annuities
While they may have a place in some portfolios, variable rate annuities can be very risky. Plus, they almost always have multiple "layers" of fees that sap away your purportedly higher ROI. For example, it isn't uncommon for a variable annuity with 8% earnings to have 4% fees - making fixed index annuities a better option.
2. Too Good To Be True Rates Probably Are
You may see some annuities advertised with potential rates of 10%, 12%, or higher. But these are uncapped annuities, which while they allow the possibility of high rates of return during unusual market surges also allow the more likely possibility of gigantic losses during market downturns. Fixed annuities "cap" both the bottom and the top so as to balance potential earnings with long term security.
3. Incorporate FIAs Into Your Retirement Strategy
It almost goes without saying that you need to diversify your retirement income to create better stability and longevity. A fixed index annuity can form a key component of your overall strategy but shouldn't be the sole plank in the platform. Find out more about how an FIA can fit into your retirement plans by clicking here!
4. Don't Go Over A 10-year Term
In general, you don't want to go over a 10-year term on your annuity. In some states, in fact, terms over 10 years have been banned. You want to compare renewal rates and conditions before buying an FIA, but having access to your cash again every 5 to 10 years (at the least) is certainly preferable.
5. Look For High Rates, Low Fees, And A Simple Setup
You may think all FIAs are basically alike, but that's not at all the case! Differences in earnings rates can vary by over 200%, so it matters very much which annuity you sign up for. All FIAs protect your principal well enough, but rates, fees, and simplicity of setup vary considerably.
6. Consider Including A Lifetime Income Rider
One of the best features offered with most fixed index annuities today is the lifetime income rider. This allows you to use your FIA for guaranteed lifetime income, which of course means not touching the principal or making withdrawals beyond a certain limit. But the value of guaranteed income late into retirement when other sources may diminish or run out is certainly high.
7. Shop Around & Use An Experienced Agent!
It can be difficult to examine the market on your own - especially given its large and growing size going into 2020. Take advantage of the knowledge base of an experienced agent when shopping around for your FIA for the best results.
To learn more or to talk to an experienced agent, contact Summerlin Benefits Consulting today!