We often get asked the question if annuities are the right choice for retirement. In most cases, an annuity is a great choice for retirement. In order to fully understand how a fixed index annuity works, you need to understand the terms and features to be able to make a decision whether or not it fits into your retirement portfolio.
Although there are several annuity products available today with different features they all are composed of the basic features that are the foundation of a fixed index annuity.
Index – the external benchmark, a stock market index, that is used to measure the growth of a fixed index annuity. The most commonly used is the S&P 500.
Participation Rate – percentage of index gain credited to the annuity.
Cap – maximum interested of the index gain that can be credited to the account.
Spread – percentage deducted from the index gain prior to applying the interest credit to the account value.
Minimum Guaranteed Contract Value – some insurance companies offer a MGCV that grow independently from the Accumulation Value. If the index were to return or negative for the entire surrender charge period, the client is guaranteed to receive their original deposit back.
Surrender Value – the amount available at the time of surrender. This is equal to the Accumulation Value less any fees, bonus recapture, and applicable surrender charges.
For more information on which annuity is right for your retirement portfolio, visit www.annuitythinktank.com