Diversifying your portfolio means balancing risk and growth. In fact, only one in four Americans understand that FIAs can add balance to your portfolio. That means protecting some of your money from the steep downsides of a volatile stock market. Of course, you can find risk protection in CDs, savings accounts, and the like. But, at current interest rates, your money won’t have much chance to grow. With FIA products, your principal can never decline from market loss, but it can grow with a rising index. And because they are insurance products, indexed annuities can offer a guaranteed income for your lifetime.
An FIA uses a unique formula to calculate annual interest based on the performance of a stock, bond or commodity index. The index is used as a benchmark; however, you do not actually invest in it, offering balance and protection against the ups and downs in the market.
Your interest earnings rate always remains somewhere between the interest rate floor and the cap. Earnings won’t rise above the cap, even if the index goes higher. Earnings never fall below zero, even if the index goes way down.
Half of Americans say the number one thing they will miss in retirement is a steady paycheck. FIAs can provide a steady, guaranteed lifetime income stream. Additionally, FIAs provide balance and help you moderate risk in your financial plan. Different FIAs have different methods for helping the insurance company manage the risk, including participation rates and a spread or fee. While these methods can limit your earnings, they also help ensure earnings never fall below zero.
No, FIAs can provide a steady, guaranteed lifetime income stream.