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What are the Benefits of Fixed Indexed Annuities?

 

If you’re looking to make promising returns on investments, you should invest in fixed indexed annuities.

A fixed indexed annuity is a type of insurance contract. It essentially ensures investors earn a specific interest rate on their contributions. When investing in one, you can expect to earn a similar amount each year without drastic fluctuations.

Before investing in something else, you should understand how fixed annuities can benefit you. Fortunately, it doesn’t take much to understand how they can help you generate income.

Keep on reading to learn about the benefits of fixed indexed annuities!

Predictable Returns

One of the main benefits of fixed indexed annuities is having predictable investment returns. When investing in a fixed annuity, you can see how much the insurance company regularly earns from corporate and government bonds.

Insurance companies typically change their investment strategy. This ensures that fixed annuities continue rising in value. Because they promise a specific annuity rate, you can expect them to pay you the same amount, whether they make or lose money.

If you were to invest in variable annuities, you’d be choosing what to invest in. However, you’d also assume a lot of investment risk so you’d be more likely to lose money. With a fixed annuity, you won’t have much control over what your money is getting invested into.

Guaranteed Rates

When investing in a fixed annuity, you’ll go through what’s known as the initial guarantee period. During this period, you’ll earn a guaranteed rate, no matter how well the insurance company performs. When the guarantee period expires, the company can then adjust the rate to accommodate for their profits or losses.

Even if the company starts losing money, you won’t. Within their contracts, they often include guaranteed minimum rates.

This prevents you from losing anything. While you may not profit much during a decline, you can ensure that your money is protected.

Tax-Deferred Growth

Fixed indexed annuities are qualified for taxes. Because of this, many people get worried about how they’ll pay the taxes if they’re still investing in an annuity. However, fixed annuities provide tax-deferred growth, so you won’t be responsible for paying them immediately.

The only time you’ll be required to pay taxes on fixed annuities is when you withdraw money from an account. Whether you regularly make a cash payment to yourself or withdraw once in a while, that money will be taxed.

Liquidity

Fixed indexed annuities are designed for long-term growth. However, one of the main benefits of investing in them is being able to withdraw the money whenever you like. Unlike something like a Roth IRA, you access funds in an annuity without penalties.

Many insurance companies will set a limit for how much you’re able to withdraw. If you’d like to withdraw more than that amount, you may have to pay a small fee. While this may seem like a downside, it’s to protect both you and the insurance company.

Guaranteed Income

Many insurance companies offer annuities that can be used to provide investors with guaranteed income payments. While you may still have a limit, you can pay yourself over certain periods without any penalties. Some companies go as far as offering payments without restricting you to a certain period.

Before investing in a fixed annuity, you can choose how often you’d like to withdraw and which amount. Creating a payment structure will make it much easier to withdraw money because you’ll prevent yourself from getting limited.

If you convert the fixed annuity to an immediate annuity, you won’t need to worry about how much you’re withdrawing and how often.

Beneficiary Protection

Many people are hesitant to invest in fixed annuities because they’re unsure of what will happen to their money if they pass away. Fixed indexed annuities offer beneficiary protection in their contracts, so you can designate someone to receive the funds.

Depending on the type of annuity you’re investing in, the beneficiary may receive a lump sum or series of payments. No matter how they receive the money, they’ll receive everything that you had in your account. This will prevent your funds from going to your estate, which could be distributed in a plethora of ways.

Principal Protection

You shouldn’t run into many problems when investing in fixed indexed annuities because life insurance companies offer several protections. Principal protection is something they focus on because it prevents you from exiting the annuity with less than how much you had upon entering.

Unlike something like a high-yield savings account, a fixed indexed annuity isn’t federally insured. Insurance companies attract investors by promising to earn them money, so principal protection is something you can expect from most.

If you check out this company on Linked In, you’ll find more info about principal protection and other features in annuity contracts.

Consider Investing in Fixed Indexed Annuities Today

Now that you have a better idea of what fixed indexed annuities can offer, what’s stopping you from investing in one? We encourage anyone that wants to generate passive income to invest in one because of how much money can be paid.

When you’re ready to invest in an annuity, look online for various insurance companies. You’ll need to compare both rates and services to ensure you invest in one that can take care of you. Keep in mind that some will offer a cash settlement once in a while whereas others will let you withdraw money whenever you’d like.

Browse our other articles to learn more about different investment opportunities!

 

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