Retirement Planning and Fixed Index Annuity – In a Nutshell

The word “retirement” may seem foreign to you now considering that you’re young and thriving at the moment. Fact is, it’s never too early to start thinking about it. If you talk to the older people around you, you’d most probably hear the same thing. When planning for retirement, one of the many challenges that you might encounter is how much should you really save so you can reach your retirement goal. When any decision involves money, it’s always difficult to weigh things over. But if you click here, you’ll learn how annuities are great investment partners.

What is an Index Annuity?

An index annuity could be fixed, variable, or a combination of the two. It’s a form of investment which can help you out in your retirement. It basically arises out of a contract of agreement between you and an insurance company. You pay a particular sum of money and they pay you in return at a particular time within a particular period. Your retirement earnings are guaranteed more or less since with a fixed index annuity, you can easily replace the value in various forms. There are also withdrawal options that you can choose from which provides you with monthly income within your lifetime.

Safety Have for Your Earnings

Not just your earnings but the principal amount, too. When interest rates increase within the stock market, your account in the fixed index annuity is well-protected. You won’t lose anything that you’ve earned nor the principal amount you invested. Unlike bonds and mutual funds, this form of annuity will not get affected by increased rates. In fact, the contract you entered with the insurance company will most probably offer renewing rates with higher cap rates based on the current interest rate.

Research also shows that a fixed index annuity have very predictable income benefits. This means that even if the interest rates fluctuate at some point, you’ll still get something in between. Many retiree-investors have been utilising this form of investment due to its agreeable guarantee on the return of investment. One benefit that you’ll get from fixed index annuity is the fact that it can make you feel safe and protected insofar as your money in concerned.

Taxation Benefits

The income that you may generate based on the annuity contract is deferred from tax. This means that you will not be paying any income tax on the supposed earnings so long as you do not withdraw from your account in the fixed index annuity. Since it has a tax deferment, you benefits from the Social Security will not decrease, too, unlike those of bonds and other investment forms. The earnings that are compounded will establish bigger returns, too.

When planning for your retirement, you have to be cautious as there are several investment opportunities in the market today. By having a retirement goal in mind, you can deduce your decisions from there.

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