Why it is smart to use fixed-index financial products to guarantee an income in retirement?
When people settle on a decision to retire, it is not only a choice that affects them personally, but also a decision that influences the individuals nearest to them, particularly their grown-up kids. A standout amongst the greatest reasons of alarm for retirees and those getting ready for retirement is the prospect of outliving their savings and resources. Along with being a very common fear, this is a rational one. In fact, according to National Institute on Retirement Security, Americans are at least $6.8 trillion short of what they need to have saved for a comfortable retirement.
While this may sound overwhelming, it doesn’t have to be. For retirement, it’s vital to guarantee you have an ensured stream of salary that lasts your lifetime and will help you maintain the same quality of life. Fixed-index financial products offer that security in the form of fixed indexed annuities (FIAs).
Let’s take a look at a little background, a fixed index annuity is a contract between you and insurance companies that may help you reach your life-long financial objectives. In exchange for a premium payment, the insurance company provides you income, either starting immediately or at some time in the future.
Why is it recommended to include a fixed-index financial product scheme as a feature of your diversified income strategy? The answer is straightforward: Fixed annuities, alongside Social Security and/or pensions, ensure guaranteed payments to help meet necessary expenses. The insurance agency is obligated to make payments to you for a particular time span you select, or if you pick a lifetime choice, the installments will occur as long you or your spouse live.
A fixed index annuity offers a unique combination of benefits that can help you achieve your long term goals. With FIAs, your principal and bonus are never subject to market index risk. A downturn in market index(es) cannot reduce your contract values.
Whereas Fixed-index income offers very low risk, Withdrawals from an investment portfolio, a rival feature in the retirement income scheme, requires its clients to be able to live with market volatility. Although it does provide potential growth, Withdrawals does not always guarantee longevity and inflation protection. This is in contrast with Fixed-index annuity, which invariably ensures longevity protection and guarantees some inflation protection.
No other product offers the tax deferral, indexed interest potential an optional benefits to protect your retirement assets and income. Let’s take a closer look at the three key benefits fixed index annuities: tax deferral, indexed interest potential and protection.
Under current federal income tax law, any interest you earned in your FIA contract is tax deferred. You don’t have to pay ordinary income tax on any taxable portion until you begin receiving money from your contract; Withdrawals are taxed as ordinary income.
Indexed interest potential
Fixed index annuities provide an opportunity for potential interest growth taking in account changes in one or more index. Due to this potential indexed interest, FIAs provide a unique opportunity for accumulation. And since the interest your contract earns is tax deferred, it may amass assets faster.
Fixed index annuities provide you a degree of security you may find reassuring. This protection can serve you in three different ways:
- Your principal and credited interests are protected.
- You can be protected from the possibility of outliving your assets
- If you pass away before annuity payments begin, a FIA may help you provide for your loved ones.
Today’s fixed-index financial products are a wonderful way to balance out a retirement portfolio because they are a low-risk insurance product that increase with index growth and are protected from market volatility. They also offer a guaranteed, steady stream of income to last throughout your retirement and help you pass on a financial legacy to your loved ones.