Benefits of Fixed Index Annuities (FIA)
For investors nearing or already in retirement, asset protection strategies are a major consideration in financial and investment planning. Investors seeking to protect and safely grow their investment savings should consider a fixed index annuity or FIA. An FIA provides principal protection along with a steady stream of retirement income and the opportunity to participate in equity gains during rising stock market environments. Below is a discussion of the key elements of FIA contracts.
What are the tax advantages?
A fixed index annuity is a tax-advantaged long-term investment vehicle issued by an insurance company. Investment returns are based upon the movement of an underlying stock index such as the S&P 500 Index. Floors and Caps specified in the annuity contract indicate the minimum and maximum returns provided under the contract. Your return will vary within this range, never falling below the specified minimum return and thus guaranteeing the safety of the principal amount invested in the annuity contract.
Funds used to purchase the FIA are never invested directly into the underlying stock index and thus investors are insulated from declines in the stock market. At the same time, investors are able to realize increased returns (up to the specified cap amounts) as the value of the underlying stock market index rises
Interest credited to the FIA contract is tax deferred until the investor begins taking withdrawals under the contract. The tax deferral feature makes the FIA an attractive investment option for taxable brokerage accounts.
The FIA can provide a guaranteed stream of retirement income for a fixed number of years or for a lifetime with the purchase of available riders. This makes the FIA a solid investment choice for the investor concerned about outliving his or her retirement portfolio.
What are the potential costs?
As with most annuity contracts, withdrawal or surrender charges may apply. Some contracts may impose fees on withdrawals during the guaranteed periods offered under the policy. Withdrawals from an FIA are subject to ordinary income tax and withdrawals prior to age 591⁄2 may be subject to a 10% penalty.
Protection of principal, a steady income stream for life, the ability to participate in equity gains during a rising stock market and the advantages of tax deferral are some of the benefits of a fixed index annuity or FIA. To determine if an FIA is right for you, contact Wealth House LLC. Our advisors can help you evaluate and determine if a fixed index annuity is appropriate for your investment portfolio and can discuss other asset protection strategies that may be available.
Contact Wealth House:
Headquartered in Naperville Illinois, Wealth House LLC provides integrated solutions for wealth, tax and insurance management. Contact us at [email protected], or by phone at (630) 790-1030. If you are in the Naperville area, visit our headquarters at 564 South Washington Street.
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