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Annuity Overview

A RETIREMENT BUILT TO LAST:
Fixed Index Annuities as Part of an Overall Retirement Income Strategy


Today’s retirees are living longer, healthier, and more active lives than any generation before. Many people underestimate how long they will live, putting strain on personal savings and increasing the likelihood of outliving their assets. It’s important to have a strategy in place to help maintain your standard of living so you can fully enjoy your golden years. A fixed index deferred annuity is one such solution that can assist in providing a comfortable retirement.

As part of an overall retirement income strategy, a fixed index annuity combined with a benefits or income rider can help you grow a portion of your assets. It can also supplement other sources of retirement income, such as Social Security, pensions, and personal assets. Keep in mind that fixed index annuities and riders may not be suitable for everyone. However, they may be ideal if you’re looking to:

  • Generate a guaranteed stream of income as long as you live
  • Provide a predictable, reliable source of retirement income for a surviving spouse
  • Bridge the gap to full Social Security benefits if you delay until your full retirement age
  • Cover unforeseen expenses as you get older
  • Create a lasting legacy for your loved ones

What is a Fixed Index Annuity?

A fixed index annuity is a contract between you and an insurance company. It is a long-term retirement savings and income vehicle that can help protect you from outliving your assets. When you allocate a portion of your retirement assets in a fixed index annuity, you can create your own personal “pension plan” that generates guaranteed income for as long as you live if you choose.

With a fixed index annuity, the interest your contract earns is based, in part, on a stock market index. This provides you greater upside potential than other retirement savings vehicles, such as traditional fixed annuities, Certificates of Deposit (CDs) and savings accounts. A fixed index annuity protects your principal from market loss.*

Optional income or benefits riders, available for an additional fee, can enhance your retirement income potential.

Example: Meet Robert and Sarah

Learn how Robert and Sarah use a fixed index annuity as part of their overall retirement income strategy.

Robert and Sarah are married and are both 50 years old. They are employed full time and have been diligent in saving by contributing regularly to their 401(k) plans and Individual Retirement Accounts (IRAs). Both Robert and Sarah hope to retire in 10 years.

While they are confident in their retirement savings strategy, Robert and Sarah are concerned about how they are going to supplement their retirement income. They both lack an employer-sponsored pension plan, so they will need to rely on their retirement savings to help them cover future essential expenses, especially during their first 10 years of retirement. This is because the couple wants to delay taking Social Security until they reach age 70 so they can maximize their benefits. Another concern is paying for potentially hefty medical insurance premiums until Medicare kicks in at age 65.

After learning about the benefits of a fixed index annuity combined with a rider, the couple purchases an insurance product – a fixed index annuity – and rider (which is available for an additional fee), as part of their overall retirement income strategy.

A Fixed Index Annuity In Action

Age 50:
Reposition $100,000, which is a portion of the couple’s retirement assets, to a fixed index annuity (10-year surrender charge schedule) combined with a benefits or income rider.

What does this do?

  • Gives Robert and Sarah the opportunity for tax-deferred accumulation
  • Preserves principal and protects against market downturns
  • Provides income growth potential

Age 60:
Turn on income from the rider. Robert and Sarah receive $6,300 annually, which is their guaranteed lifetime income.*

What does this do?

  • Gives Robert and Sarah a steady flow of income they can count on for the rest of their lives
  • Helps supplement income to help pay for health insurance and other expenses

Age 65:
Medicare begins.

Age 70:
The couple starts taking Social Security benefits.**

How FIA's Work - Chart

This depiction is not intended to represent any specific product, but is merely to show how a fixed index annuity with annual reset works. This hypothetical example assumes a $100,000 initial premium, an annual reset design, and 25% “participation” in the upward movement of a 1-year point-to-point index crediting strategy. It assumes no withdrawals, no additional premiums and no premium taxes. The example is intended as a conceptual illustration of how a fixed annuity might work over a period of time. The assumptions are not guaranteed.

Start Planning Your Retirement Income Strategy

By taking the time to plan now, you can help ensure that you have enough income to last through retirement. Planning for the future can often be complicated and full of questions, but having choices makes finding the answers a whole lot easier. Consult with your Insurance Insight Group insurance professional today to learn more about fixed index annuities and retirement income strategies.


*Assumes a hypothetical benefits rider rollup rate of 8.0% and 10 years of income deferral. Also assumes no withdrawals during the 10-year surrender charge schedule.

**It’s important to consult with financial, tax, and legal professionals to determine when it’s best to begin taking your Social Security benefits. A number of factors can play into this very important decision, including: taxes, future income, age difference between spouses, potential medical issues, and former earnings history. For more information about Social Security, you can read: “When to Start Your Benefits” available at http://www.ssa.gov/retire2/applying1.htm.

This material has been prepared for informational and educational purposes only. This information has been provided by a licensed insurance agent and is not sponsored or endorsed by any governmental agency. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. Please consult with a professional specializing in these areas regarding the applicability of this information to your situation. This agency, the individual agents, and the insurance carriers they represent do not guarantee the validity of the content found on any third party site, and are not responsible for maintaining the content provided therein. Guarantees provided by annuities are subject to the financial strength of the issuing insurance company; not guaranteed by any bank or the FDIC. Guaranteed lifetime income available through annuitization or the purchase of an optional lifetime benefits or income rider, for which an annual premium is charged. Annuities are long-term products of the insurance industry designed for retirement income. They contain limitations and exclusions, including withdrawal charges and a market value adjustment that will affect contract values.

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