• Tom

Why Invest in Fixed Indexed Annuities

I have written a number of articles on Linkedin covering several topics, but none more important than this one on Fixed Indexed Annities. (FIAs). First, what is an FIA? It is an insurance product, not a stock, bond, mutual fund or any other financial instrument where you own shares in the market. It is an insurance product sold only by agents with a Life Insurance license. How do you invest in a FIA? You invest in different indexes you choose with an agent's help, and these indexes follow, and increase with all increases in the market. But here is a distinct difference. If the market drops, the value of your FIA remains unchanged. It does not drop with the market. The short, intermediate, and long-term result is that your FIA constantly increases over time. That's a brief definition of an FIA, but let's define and describe them in more detail:

  • In 2020, the government limits your total IRA contribution to $6000 ($7000 if age 50+). With the FIAs I offer, you can invest as much as you want, whenever you want, for as long as you want to.

  • If you have money invested in an IRA with taxes deferred, you can transfer all or a portion of the funds to a FIA, where your money continues to grow tax-deferred.

  • Because a FIA is an insurance product, you designate your beneficiaries in the contract, and in case of death, they pass without probate to those beneficiaries.

  • 65% of Americans rank out-living their retirement savings as their #1 concern. For people approaching retirement age, I help them think about shifting their investment strategy from 100% wealth accumulation, to income distribution, in the form of annual guaranteed income for life, no matter how long they live.

  • The solution for many baby boomers is to have no losses on their principle and receive a guaranteed annual rate of return of 4-8% over time that stays tax-deferred.

  • You can roll-over your 401K into a FIA tax-free, and continue to have your earnings grow tax-free. Earnings on a bank CD are taxable.

  • Objection #1 to investing in FIAs: They tie your invested funds up too long. It's true that FIAs are a longer-term investment. My FIA products have a 5-year surrender period, not 7, 10 or 15 years, and you can take a 10% penalty-free withdrawal each of those 5 years. With a bank CD you cannot withdraw a penny early without paying a penalty.

  • Objection #2 to investing in FIAs: Moderate retirement income. This just is not true. We can include an 'income rider' that will pay an annual guaranteed income for life amount that you calculate. You can turn that income on immediately or anytime you choose in the future, and again, that amount is guaranteed for the rest of your life.

Thank you for reading the article! If you have any questions just let me know.


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