Advantages Of Fixed Index Annuities
Fixed index annuities offer the opportunity for people to invest in the stock market with a certain amount of guarantee. While there is no guarantee that any stock will always continue to grow, there can be a guarantee on the initial money that you invest into the stock market when that initial investment is insured. This is precisely how fixed index annuities work. If you want to save for retirement and have less risk in the stock market, these annuities can be a great way to go. It can make a lot of sense to have your money in one place, slowly acquiring a certain amount of growth, and to leave it there until you are ready to use it.
Fixed index annuities take your initial investment and put it into a major stock in the stock market. Major stock tends to offer a little more security than other stock that is not necessarily tried and true. This does not mean that the major stock will not decline at times. The stock market is constantly fluctuating, and even major stock has good days and bad days. When your money is invested, on those good days your money will grow. If the stock declines, the growth you have experienced may also decline. Your initial investment, however, is protected to a certain degree.
Even if the stock does fall a great deal, with fixed index annuities you will never lose that initial amount that you put into it. That money is insured and safe. What’s more, the gain that you experienced in the account in previous years is also safe. This means that if your money grew last year, but the stock market is falling this year, your money that you gained last year is not subject to be lost in the market decline. It is almost like a guaranteed amount of growth.
In addition, fixed index annuities usually offer some sort of guaranteed cash value increase. This is basically an interest rate on the base amount that is in your account. Even if you do not make any gains with the stock market, you can still experience growth through interest. So in addition to protecting your money that you initially invested into the account, you are also guaranteed a certain amount of interest growth. The interest rates and amount of growth available to you may differ depending on where your money is invested, but most companies will offer a certain amount of guaranteed cash value growth.
With fixed index annuities, your money is not completely untouchable, either. These annuities offer you the chance to access your money if you need it. It is important to be aware that depending on how much you decide to withdraw from your account, you could be subject to certain surrender charges. What the charges are and how much they come to differ depending your personal annuity and the company that is holding it for you. Many companies may allow you to withdraw up to ten percent of your base investment without any penalty whatsoever. After that first ten percent, however, you may be charged a certain percentage for a surrender fee. A fairly common form of this is 20 percent of your investment. This is why it can be wise to simply leave your money where it is for a while.
Many annuities also allow you to choose from certain plans how long you would like your money to be invested for. Many companies may offer 8 or 10 year plans. With an 8 year plan, you leave your money in the annuity for up to 8 years, during which withdrawals may be subject to charges. The same is true for a 10 year plan. After the set amount of time is up, your money is turned over to you again along with any growth that it experienced through interest or the stock market. You can then re-invest the money if you so desire. Each plan may be different, so it is important for you to ask any questions and get as much information as possible before deciding which plan is just right for you.
Fixed index annuities offer the advantage of a safe way to invest by protecting your initial amount. If you are looking for an account that offers growth through interest, protection in yearly gains, and the opportunity to grow even more through major stock in the stock market, these types of annuities might just be the thing you are looking for.