Our 10 Reasons To Include A Fixed-Index Annuity In Your Retirement Plan

Let’s get real for a moment. Creating a game plan for retirement can be completely overwhelming as you sift through all the retirement investment options out there today. It can sometimes feel like playing the lottery – are you going to win or lose based on which investment type you choose. But the reality is that you will always have risk when choosing the right investments. 

 

The good news is that you don’t have to feel overwhelmed. Here at Oak Harvest Financial Group, we value sharing our knowledge about possible investment options for you to consider. And listen, we totally understand that everyone’s situation may be different – including the specific investment option we are looking at today. We can also lean on what Sir Francis Bacon enlightened us with many centuries ago, “Knowledge is power.” And really, who doesn’t like bacon? 😉 But I guess we’ll stick with knowledge for today.

 

A Fixed-Rate Annuity

One investment option that is increasing in popularity is known as a fixed-index annuity (FIA). This type of annuity is issued by a life insurance company where the deposits (premiums) are made in return for a financial contract that outlines certain guarantees and risks. The insurance company then monitors the positive movement of a market index like the S&P 500 to determine the amount of interest you will earn. The best part of this type of annuity is that your premiums invested are 100% protected from any losses, regardless of what the market does. Additionally, your interest earnings will never be below zero. Now that’s some protection right there!

 

Here at Oak Harvest Financial Group, we wanted to share our top ten reasons you should consider adding a fixed-index annuity to your retirement plan.

 

1. Avoid Pay Taxes Now On Your Earnings

One major advantage of a fixed-index annuity is that all taxes on interest earned is deferred. This tax-deferred feature simply means that you do not have to pay taxes on your gains each year. You only pay taxes when funds are taken out of the investment in the future, typically at a lower taxable income bracket at retirement. This is similar to an investment like an individual retirement account (IRA) or 401(k). This provides a significant amount of savings on taxes over the life of the annuity.

 

2. Reduce The Risk of Losses

Since fixed-index annuities are not invested into the stock market, you don’t have to lose sleep over losing your hard earned money if the stock market crashes. The life insurance company only uses the market as a guide to determine positive growth for the annuity. Your premium AND earnings will be protected from losses as this annuity grows.

 

3. Earn Interest When The Stock Market Performs Well

As mentioned previously, a fixed-index annuity allows you to take advantage of higher earnings when the stock market is performing well and side-step when the market is performing poorly. Sounds too good to be true? Well, we have seen first hand how this type of annuity provides consistent gains even when the stock market takes a large dive. 

 

4. Take Your Interest To The Bank

Fixed-index annuities also allow you to lock in interest earned and remove risk of losing those gains. Typically at each contract anniversary for the annuity, the interest earned will be credited to your annuity and it will never be below zero. Once credited, that interest earned is now fully protected like your initial premium investment.

 

5. Take Advantage Of Better Rates Than Traditional Investments

Traditional investments like savings accounts or CDs offered by most financial institutions do provide protection from market risk like a fixed-index annuity, but they don’t have the potential to increase your returns. Why not consider a product that can offer the same level of protection as a CD, but also increases your ability to earn more?

 

6. The Triple Benefit Of Earning Interest

A fairly common term when it comes to earning interest on an investment is compound interest. Compound interest is the interest on an investment that accrues on both the initial principal and accumulated or credit interest from previous periods. So what does that mean for a fixed-index annuity? Well, you get to take advantage of compound interest, but you also get to power up and receive a triple benefit by taking advantage of the earnings being tax-deferred. So you earn interest on your premium, interest that has been credited AND interest on what would have normally been paid in taxes. That is a triple threat!

 

7. Lower Fees Means Money Back To You

Compared to a variable rate annuity, the fees for a fixed-index annuities are much lower as they have less risk involved. Often, fees are less than 1% of the investment account, but it will be fully dependent on the terms and conditions of the annuity. Because of the savings in fees, this is a great low-risk vehicle to consider being part of your investment portfolio.

 

8. Don’t Let Contributions Limits Hold You Back

Unlike traditional investments like 401(k) or IRAs that have maximum contribution limits each year, a fixed-index annuity has no limits. This could be particularly beneficial for someone who maxes out their annual contributions to their 401(k) and IRAs, especially if retirement age is fast approaching. For some people, an FIA can be a great place to park money to defer taxation, keep it safe, and continue to earn.

 

9. Get Paid For Life

There are some fixed-index annuities that offer a lifetime income rider or guaranteed payments from your annuity for as long as you live. Any additional funds left in the annuity would then be passed down to assigned beneficiaries. Many families may find peace of mind knowing that this investment can play a significant role in your retirement income and be passed on to the next generation.

 

10. Don’t Let Inflation Rob You

Inflation is a challenge to battle in some investments, yet the fixed-index annuity allows you to to fight against inflation. Your earnings will continue to increase even as inflation negatively impacts the economy and markets. Yet just another amazing way fixed-index annuities provide stability to your long-term earnings toward retirement.

 

In summary, fixed-index annuities are worth considering as part of a retirement strategy. Whether you plan to retire on a beach in the Bahamas or enjoy your retirement around family and friends, an FIA may offer the right mix of security and growth potential to enhance your retirement.

 

Investment Advisory services are provided through Oak Harvest Investment Services, LLC a Registered Investment Advisor. Insurance services are provided through Oak Harvest Insurance Services, LLC. Oak Harvest Investment Services, LLC and Oak Harvest Insurance Services, LLC are not affiliated with the U.S. government or any government agency. Information presented is for educational purposes only intended for a broad audience. Not an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies.

“Peace of Mind,” “Safety,” “Principal Protection,” “Lifetime Income, “Guaranteed Income,” or other guarantees are associated with fixed insurance products. No such language refers in any way to investment advice, investment advisory products, securities, or recommendations provided by Oak Harvest Investment Services. Investing involves risk. Rates of return are not guaranteed unless otherwise stated. All guarantees are dependent on the financial strength and claims-paying ability of the issuing insurance company. Annuities have limitations and are not appropriate for all circumstances or individuals. They are not intended to replace emergency funds or to fund short-term savings or income goals. Lifetime income may be available on certain products through an optional rider, at no cost or for an additional cost, depending on the contract. Insurance products are not insured by any federal government agency and may lose value. By contacting us, you may be offered information regarding the purchase of insurance and investment products. 

Oak Harvest has a reasonable belief that this marketing does not include any false or material misleading statements or omissions of facts regarding services, investment, or client experience. Oak Harvest has a reasonable belief that the content as a whole will not cause an untrue or misleading implication regarding the adviser’s services, investments, or client experiences. Please refer to oakharvestfg.com for additional important disclosures.