3. FIXED ANNUITY
As the name implies, a Fixed Annuity offers a “fixed” rate. Under the name of a Fixed Annuity there are two specific ways the fixed or declared rate are delivered.
The most popular way is the interest rate is guaranteed every year of the term selected. When the rate is guaranteed, it is called a Multi-Year Guaranteed Annuity or MYGA. The term typically ranges from 3 – 10 years. Often times, the longer the term, the higher the rate. With a MYGA, the client can feel the comfort of knowing exactly what they make every year.
The traditional way for many years was a Traditional Fixed Annuity. The rate would often be guaranteed for one year and would most often include a bonus for the first year. After year one, a new rate is declared each year thereafter. The contract is required to include a minimum rate the carrier can offer, typically between 1 – 3%. During lower rate environments, the minimum would typically be 1% with higher rate environments possibly offering a minimum guarantee of up to 3%. The Traditional Fixed Annuity may or may not renew at the base rate, but cannot go any lower than the minimum guaranteed rate included in the contract at the time of purchase.
An advantage of a Fixed Annuity is having dependable performance for stability in your retirement funds. In addition, it may offer a specified amount of liquidity during the surrender charge period via penalty free withdrawals and waivers. The Fixed Annuity gives tremendous strength by providing the peace of mind that you cannot lose your funds in the market.
4. FIXED INDEX ANNUITY
The Fixed Index Annuity or “Equity” Index Annuity is very similar to a Fixed Annuity in regards to safety and allows you to participate in the upside of the market while protecting your funds from any market loss. The product was originally named Equity Index Annuity, but because there is no equity exposure, most insurance companies now call them a Fixed Index Annuity.
This annuity guarantees you will never receive a negative return, while allowing you to participate in the “Upside of the Market” without participating in the “Downside of the Market”. The most popular Index/Indices used is the S&P 500. We are now seeing several other Indexes being used, but the principals are all very similar. The upside participation you receive may involve a cap, spread, and/or participation rate. While the most popular strategies credit interest on a 1 Year Point to Point basis, more and more insurance companies are using 2 Year, 5 Year and even 10 Year Point to Point strategies.
Benefits You Can Expect from Annuities
Annuities come with a number of benefits whether the account holder is a retired individual or someone in his or her 30s. There is no such thing as a yearly contribution limit involved with non-qualified annuities, and you can put away a higher amount of money for your retirement funds. What’s more, the money invested is compounded annually while being tax-deferred.
If you already have a pension plan or social security, an annuity can complement these sources of your retirement income. You have the option to receive set payments as long as you live or take out a lump-sum of cash from your account. Either way, you have the security of having a dependable income stream to cover your expenses during retirement, which can certainly make your life much easier.
Pacific Insurance Group aims to provide potential clients with the best professional advice in determining the right annuity product and coverage suitable to their particular situation. With our broad knowledge base and years of experience in this field, clients can expect to receive the highest level of service they deserve. Give us a call today and find out more about our products and services to cover all your needs.