The world of investing can be a complicated place. With so many options available, it's easy to feel like you've bitten off more than you can chew.
At Kelly Capital Partners, we're here to help you get started on your financial journey. We know that saving for retirement is a daunting task, but it doesn't have to be a complicated one. Fixed Index Annuities are a great way to diversify your financial portfolio and prepare yourself for the future.
Let's take a closer look at what they are and how they work.
Fixed Index Annuities are a type of annuity that offers you the opportunity to invest in both a fixed interest rate and an index, like the S&P 500. This means you can get the best of both worlds when it comes to your investment strategy: access to growth potential and protection from stock market loss.
Here's how they work: You enter into a contract with an insurance company. You pay them a set amount, and they invest that money into bonds, stocks, and other types of investments. Once the term of the contract expires, you can either get your initial investment back or continue to receive regular payments from the insurance company, which has grown your original investment through their investing strategy.
Are you looking to grow your money at a fixed rate that doesn't fluctuate with the market? A Fixed Indexed Annuity might be the investment you've been looking for.
Here is an overview of the benefits.
● Benefits to your beneficiaries: If you or your spouse pass away with assets still in the account value, then that balance will pass on to the beneficiaries. Our first priority is helping you take care of yourself and your family. We want to learn more about your personal situation, identify your dreams and goals, and understand your tolerance for risk. Long-term relationships that encourage open and honest communication have been the cornerstone of my foundation of success.
So, you've decided to purchase an annuity. You're probably excited to see your income grow. Before you get too far in the process, there are a few things you should know.
Is It an "A-Rated" Insurance Company?
The first thing to look at is the insurance company behind the guaranteed rate of return. You want an "A-Rated" insurer who has been in business for a long time and is considered extremely stable. This will give you confidence that they have the financial strength to back up the guarantees they've made.
Qualified Money or Non-qualified Money?
You can purchase an annuity with either qualified money (e.g., IRA) or non-qualified money. If purchased with qualified money, distributions from the annuity will be taxed as ordinary income when withdrawn and will be subject to a 10% penalty if you make a withdrawal before age 59½, unless it is used for certain purposes, including disability and health insurance premiums for unemployed individuals.
Non-qualified funds are not subject to these restrictions but instead may have surrender charges if withdrawn too early.
Annuities are long-term investment vehicles that typically come with limited liquidity, so it's important to look at the terms of any contract before signing on the dotted line. There are usually limited withdrawal options available; however, many annuities allow 10% penalty-free annual withdrawals after the first "surrender charge" period (usually 7 to 10 years).
Annuity investors want to know their retirement funds are safe, and that they're getting a good rate of return/growth. There are three main types of annuities: fixed, variable, and fixed index income.
When you buy a fixed annuity, the insurance company guarantees you will receive an interest rate (specified in your contract) over the term of the annuity. For example, if you purchase a fixed annuity at 3% each year for ten years, then you'll get paid 3% each year for the ten years that the annuity is active. If the market goes up or down during this period, it won't affect your payouts.
With a variable annuity, investors assume the risk of their subaccounts not outperforming a fixed annuity's guaranteed return. This means that the principal is not protected and there is a surrender period and limited liquidity. However, variable annuities often come with a guaranteed death benefit and generally have three types of fees: Mortality and expense fee (the wrapper) 1.40%; Investment fees for separate accounts 1.35%; Rider fee example 1.00%. So total estimated fees per annum are 3.75%.
Fixed index annuities can be selected for straight accumulation or income. If you choose accumulation, the product participates in growth with principal protection from stock market losses for the term. You can withdraw a certain percent each year if needed. If you choose an income product, you get periodic payments beginning immediately or in the future, depending on the contract you choose for you and your spouse. Your contract also allows for growth accumulation until the term is up.
Want to learn more about how fixed index annuities can help you save and invest for the future? We'd love to help you get started.
Here at Kelly Capital Partners, we're dedicated to making sure our clients feel empowered and informed when it comes to their financial future. From finding the right annuity for you to understanding all the different benefits that an annuity can give you, we've got you covered.
Contact us today for more information.