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Preparing and taking action ahead of time is key when laying the groundwork for your future retirement income. Part of that process is to make sure that a portion of your retirement nest egg is safe from market loss but it’s also just as important to make sure you will continue to earn a reasonable rate of return on your safe money.
This can only be accomplished with a Fixed Indexed Annuity. Unfortunately, some annuities have gotten a bad rap in the media over the years - partly because many advisers fail to appreciate and/or accurately convey the annuity’s true purpose to consumers. When used correctly, with the client’s best interests in mind, these products can be an absolutely vital part of your retirement planning.
Today we’d like to clear up the role that Fixed Indexed Annuities play in helping our clients to diversify their retirement portfolio. In protecting the savings you’ve made all of these years while insuring the income you’ll need for the future, an FIA will definitely help you be better prepared for what may be to come.
The reality is that FIAs offer many unique advantages that do add security and predictability to your investment portfolio over the long haul. While keeping some money in stocks and bonds, life insurance, and other areas is a good idea - so are FIAs, and here are 5 reasons why!
1. Enjoy Fixed Index Annuities' Tax-deferred Status
One of the biggest reasons to opt for an FIA is to take advantage of their tax-deferred status. Some fixed index annuities allow unlimited tax-deferred contributions, which isn't true of many other retirement-focused investments.
If you are about to max out on your contribution limits on your IRA, 401K, or pension plan, then maybe it's time to add an FIA so your tax-deferred contributions can continue.
2. You Can Gain Compounded Earnings
Not only can your FIA accounts be tax-deferred, but they stay that way indefinitely until you actually withdraw funds from your account. You don't have worry about earned interest from an FIA when you file taxes each year, nor does any interest earnings offset Social Security benefits.
Your compounded earnings and the whole account remain untouchable by taxation until you decide it's time to cash in or to start taking income, at which point ordinary income tax would be applied but only on the portion you withdraw.
3. Rely On Fixed Index Security
Unlike stocks and bonds, which fluctuate significantly with market changes and which can even lose principal during severe downturns - fixed index annuities are stable and "principal protected". Your account will grow with the market index whenever the stock market is up but will never lose money when the stock market is down. In fact, both your principal and your earnings have special security guards that prevent loss in a sour market, while still allowing substantial gains in a bull market.
4. Arrange A Probate-free Inheritance Process
Another reason to start a fixed index annuity is to facilitate quick, uncomplicated distribution of inheritance funds to your heir or heirs.
Because FIA’s operate like insurance contracts, if you pass away a death benefit is paid to your designated beneficiary. Many people choose to rollover qualified funds from a 401k or IRA for example, via a non-taxable funds transfer, then name an heir as beneficiary. In doing so, your FIA account will continue to grow with the index of the stock market, the money will remain tax deferred, and if you pass away the value of the entire account is payable as a death benefit, avoiding probate.
This process can also be accomplished with non-qualified funds; enabling the FIA to grow over time with the stock market index without capital gains tax and again, leaving the money as a death benefit payable to a beneficiary at the time of your death with no probate.
5. Get Guaranteed Lifelong Income
Finally, to avoid the possibility of outliving your retirement savings, you can use FIAs to create a guaranteed, lifelong "annuity income stream". This comes in the form of a monthly check guaranteed to remain stable as long as you live. Many of these FIA products also offer a similar guaranteed payment for Long Term Care services.
These are just some of the most important reasons to include fixed index annuities in your portfolio. Summerlin Benefits Consulting specializes in Fixed Indexed Annuities and help our clients every day, to protect their savings and ensure that the retirement goals they have are fulfilled.
To discover even more about these valuable retirement assets, contact Summerlin Benefits Consulting today!