What are indexed Annuities?

An Indexed Annuity is similar to a Multi-Year Guarantee annuity and they both are often referred to as a fixed annuity. The primary difference is how interest is credited. With a MYG annuity you are credited a set and guaranteed interest rate. Indexed annuities are tied to the performance of a market index e.g. S&P 500. The better the index performs the more interest your annuity is credited. But if the index declines you will not receive any interest credits but you will not lose any of your investment. Index Annuities are a good solution for those who like the safety of a MYG annuity but would like a bit more earning potential.

Indexed Annuity Rates Today

these are today's current indexed annuity rates

Term Company S&P 500 Annual Point to Point Cap Rating
3 Years Great American 6.50% A+
3 Years Oxford Life Insurance Company 6.25% A

Term Company S&P 500 Annual Point to Point Cap Rating
5 Years Fidelity & Guaranty Life 9.00% A-
5 Years Lincoln Financial Group 8.75% A+
5 Years American General Life Insurance Company 8.75% A

Term Company S&P 500 Annual Point to Point Cap Rating
7 Years Fidelity & Guaranty Life 9.75% A-
7 Years Great American 9.00% A+
7 Years Global Atlantic Financial Group 9.00% A
Term Company S&P 500 Annual Point to Point Cap Rating
10 Years Fidelity & Guaranty Life 10.00% A-
10 Years Global Atlantic Financial Group 9.00% A
10 Years American General Life Insurance Company 9.00% A

How Does an Indexed Annuity Work?

An indexed annuity interest returns are tied directly to a stock market index. The S&P 500 is a very common option. An index annuity holder tied to the S&P 500 will earn interest if the S&P 500 increases but earn no interest if the index falls below what it’s starting value was. The index starting value resets annually which can work out well because it offers the annuity owner a chance to catch market increases after a bad year.

The Benefits of An Indexed Annuity

indexed annuities offer a few special benefits to their owner

Worry Free Growth

Index Annuities offer market-adjacent returns with no chance of a market loss. With an annuity you are generally capped on the upside but with no chance at loss and index annuity can offer steady worry free growth.

Tax Deferred

Like MYG annuities they grow tax deferred allowing your interest to compound on itself growing your nest egg faster.

More Growth Opportunity

Offers more growth opportunity than a Multi-Year Guarantee annuity.

Annuities FAQ

common questions we get asked about indexed annuities

Your money is backed by the financial strength of the insurance carrier. It’s important to make sure you’re partnering with a strong company. Additionally there are protections from the state guaranty association.

 

I’ve heard annuities lock your money up and that you have little access. It’s true that annuities have surrender periods. A surrender period is the length of time the insurance carrier can hold your asset. But, you get to choose the length of time. Surrender periods can be as short as 2 years and as long as 10. Additionally all annuities offer annual free withdrawals of up to 10% and provisions if the owner becomes terminally ill or is confined to a nursing facility. 

 

Some annuities have fees, and some don’t. Most annuities used for simple accumulation have no fees. If you are using an annuity for lifetime income it could carry a fee. If you have an annuity that you believe has too high of a fee or too many fees feel free to contact us for a free review. 

 

If you pass away while still in an annuity contract any early surrender charges will be waived and the total account value will be sent to your designated beneficiary(s).

 

The Pros and Cons of An Indexed Annuity

we can help you determine if an indexed annuity is right for you

Tax Deferral

You will not have to pay interest until you make a withdrawal so your interest will compound onto itself for as long as you keep your money with the annuity.

Skips Probate

Annuities have a named beneficiary so your assets go to exactly who you chose.

High Return

Higher possible returns with no chance to lose your principal.

Low Return

There is a chance you can earn nothing in any given year if your index doesn’t perform well.

Surrender Period

Annuities offer reasonable growth additionally they can protect against a loss in the market. But in order for the insurance carrier to be able to offer these perks they need to assure that they can hold the asset for a period of time. If you withdraw your money early an insurance carrier can charge you a surrender fee. For every year the insurance carrier holds your money that fee decreases. This is referred to as the surrender period.

Liquidity

Annuities are not as liquid as a cash account. Generally you can make 10% annual withdrawals from your annuity or have access to the total credited interest annually. To access the entire amount you must wait anywhere from 2-10 years depending on your selected annuity.

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