Using Fixed Indexed Annuities
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Fixed index annuities (FIAs) provide principal protection and upside potential pegged to a stock index like the S&P 500, while locking in annual gains. They offer an alternative to stocks and mutual funds for building wealth securely. While FIAs cap annual returns, typically between 5.5-12%, they avoid losses when markets decline. FIAs started gaining popularity after the 2000-2002 market crash as a safer way to grow wealth. Compared to CDs, FIAs provide tax-deferred growth and often higher returns. FIAs use stock market returns but guarantee the principal will never decrease.
Using Fixed Indexed Annuities
- 1. Using Fixed Index Annuities(FIAs)To Protect and Grow Your WealthBy: Neal B. Inscoe, CWPPFounder/President APB, Inc.
- 2. Typical Wealth BuildingThe Stock MarketIndividual StocksMutual FundsProblems with the Stock Market?No downside protectionInconsistent resultsTougher to recover from down yearsThere is nothing wrong with building wealth in the Stock Market so long as you understand the risk and have a long time investment horizon.
- 3. Losing your Hard Earned DollarsDid you have money invested in stocks and mutual funds between 200-2002?How about the end of 2007 and the beginning of 2008?Did you lose money?The Stock Market went down approximately 40%between 2000-2002 and over 46% from November of 2007 to November of 2008.Millions of people lose billions of dollars when the stock market takes a downturn.
- 4. Mitigating Risks CDs vs. Fixed AnnuitiesCertificates of Deposits (CDs)Low rates of returnTaxed annuallyYour money isSAFEFixed AnnuitiesIncome tax deferred (which is good)Traditionally they have higher fixed annual return than CDsYour money is SAFEMany People over the age of 55 would be better off with Fixed Annuities vs. CDs
- 5. Fixed Indexed Annuities (FIAs)FIAs started to become popular in 2000-2002 when the Stock Market declined 40%Millions of people were looking for SAFEways to grow wealthWhy look to FIAs?Principal protectionGood upside growth potential
- 6. FIAs…ContinuedFIAs are “fixed” annuities with a few “kickers”An “indexed” rate of returnFIAs peg the returns to a measuring stock Indexsuch as the S&P 500* (*minus dividends)FIAs are tax-deferred annuities wherein your account balance can never go backwardsdue to market returnsLock in the gainsFIAs lock inthe investment returns (products vary but most lock gains annually)
- 7. Caps On ReturnsMost FIAs have caps5.5 to 12%+FIAs give you 100% principal protectionHowever, the cost for that protections is some of your upside growth potentialExample: Annual point to point with an 8% capJanuary 1, 2008 – you fund $100,000 into a FIAAssume the S&P 500 index value = 1000January 1, 2009 – the value of the S&P 500 index = 1100 (10% positive return)The account value in your FIA = $108,000
- 8. Principal ProtectionRemember, your FIA will not go backwardswhen the market goes negativeExample: Annual point to point with an 8%capJanuary 1, 2008 – you fund $100,000 into a FIAAssume the S&P 500 index value = 1000January 1, 2009 – the value of the S&P 500 index = 900 (10% negative return)The account value in your FIA = $100,000
- 9. Fixed Indexed AnnuityYour stairway to financial peace of mind
- 11. Surrender ChargesFIAs are no different than most annuitiesThere are surrender chargesThey can last 5-12+ years (diminish as years progress)Longer surrender periods usually = better annuity termsIt is a good idea for many to ladder FIAs10% withdrawal optionShort-term money should not be in FIAs
- 12. If You Only Knew… How Much of Your Money Would be in FIAs?5 year historic review of the S&P 5002003 14.71%2002 -22.09%2001 -11.88%2000 -9.10%1999 21.04%The average rate of return over the five year window was -1.45%
- 13. If You Only Knew…ContinuedZERO is HERO!
- 14. The Crash of 2007-2008From November 2007 to November 2008, the S&P 500 was down over 46%.ZERO is HERO!
- 15. Where Do You Find Money to Fund FIAs?IRAs*401(k) plans*Profit Sharing Plans*Defined Benefit Plans*The Safe College Plan TMBrokerage AccountsCDsMoney Market Accounts*Not withstanding that a FIA is a tax-deferred tool inside a tax-deferred retirement account.
- 16. Would You Like a 7% Guaranteed Rate on Return of Your FIA?Not discussed in detail in this presentation, however, you should know that there is a FIA that offers a 7% annual guaranteed rate of return (on accumulation value)For information on this very exciting product, please see your trusted financial/insurance professional.
- 17. Summary of FIAsA FIA is a unique and exciting tool that has the following characteristics:Principal ProtectionUpside Potential pegged to our best measuring stock indexLocking of Gains on an annual basisIf you are looking to build wealth in a secure manner with good upside potential, you should look to allocate some portion of your money into one of these unique products.This presentation covers on specific type of FIA. There are many different kinds of FIAs and you should consult your local financial/insurance professional to determine which on best fits your individual needs.