Following on the heels of a record-setting 2013, this year figures to enter the books as another strong sales period for indexed annuities. Despite a third quarter that saw an almost 9% decline from the previous quarter, overall sales for 2014 will easily pass $45 billion. The financial and retirement planning specialists at AnnuityAdvantage believe that the outlook will continue to be strong for indexed annuities, and anyone with an eye toward retirement should seriously consider them as a solid choice for a portion of their retirement portfolio.
The reasons for the ongoing record growth of indexed annuities are complex, but ultimately boil down to consumers recognizing value when they see it. Because fixed annuities are not subject to stock market based losses and the issuing insurance company provides contractual guarantees, fixed indexed annuities are among the safest and best choices for funding retirement, all else being equal.
“Fixed indexed annuities can provide retirees with one of the most reliable and efficient sources of retirement income,” explained Ken Nuss, founder and CEO of AnnuityAdvantage. “Savvy savers have long understood the merits of indexed annuities, but now a broader cross section of the investing public has entered the marketplace in droves. With the economy still on shaky ground, many near retirees worry they’ll be working much longer than anticipated. Fixed indexed annuities are a virtually recession-proof bulwark against those kinds of concerns.”
Fixed indexed annuities offer several key advantages over superficially similar retirement income vehicles. Perhaps most importantly, they offer a guaranteed minimum surrender value for the duration of the contract term. Interest earnings during the accumulation phase are tax deferred until the owner begins making withdrawals. On the other hand, annuities are by their nature not as liquid as many other investments; but, given their function, it’s logical that principal funds are not easily accessible. Early withdrawal incurs penalties and tax obligations, so conscientious planning is necessary at the outset.
While some financial planners might advise against indexed annuities before the age of 40, Nuss argues that it’s never too early to consider an alternative to the conventional wisdom of retirement planning. Provided that one can avoid depositing funds that might be needed for living expenses or emergencies, there’s no reason not to purchase a fixed indexed annuity at the start of one’s career as opposed to the middle or the end. A distinct advantage of buying early is that compounding over a longer term results in larger payments during retirement.
Nuss recommends reading and understanding all the details of an annuity contract before signing on the dotted line. For instance, Nuss cautions prospective policyholders to look at the annuity’s current cap rates as well as the minimum cap rates that the insurance company could apply in future contract years. This is the maximum interest rate that an annuity will credit, regardless of the actual stock index return that the annuity is aligned with.
For over 15 years, AnnuityAdvantage has guided consumers and helped them understand the fixed annuities marketplace so they are able to make optimal decisions based on their own unique circumstances. The professional sales staff provides resources on a full range of fixed annuity products, from indexed and multi-year guarantee annuities to immediate income annuities.
To learn more or get answers to your annuity questions, give us a call at 1-800-239-0356.
