Annuity for retirement can safeguard your future retirement plan when you locate a good insurance company that can offer you the best options. There are various annuity options to choose. Indexed annuity is certainly one of them. There’s a lot you’ll benefit when you know more about it.
In the past, there are only two basic options for annuity for retirement. They include Fixed and Variable annuities. People have always gone for either of the two. However in the early 1990’s, indexed annuity was introduced as a third option. Ever since then, it has continued to gain wide recognition as many people keep going for it.
Basically, indexed annuity as a form of annuity for retirement is designed to mirror the performance of a specified or common index. It involves the tracking of a popular index. When this is done, the owner of the index annuity can easily participate in the general market change. He or she is also able to track the status of the values of the annuity.
In most cases, insurance companies offering index annuities as part of annuity for retirement usually specify the participation rate which is the level at which the index annuity owners will be allowed to be in the market.
Usually, the participation rates are quoted in percentages. The insurance company involved usually mitigates the downside risk. Oftentimes, many insurance companies that offer indexed annuity usually state that the annuity owners will not receive less than the cash they deposited originally irrespective of how the index performs. Some of the companies may even go further to ensure that the value of the indexed annuity will always increase by a minimum annual interest rate.
In most cases, increases in indexed annuities come with a spread. This is the difference between the amount credited and the annuity funds earned. The spread in indexed annuities normally reflect in the statement issued by the insurance company and in the initial contract signed.
As a kind annuity for retirement, indexed annuity is tax deferred. You don’t have to pay any dime of tax until you make your withdrawal. The annuity is meant for supplying income during retirement, hence, it’s usually held for long term.
From the above, it’s very clear that indexed annuity is somehow too technical. You need to pay close attention when going for it. There are some features to consider when thinking of choosing such an annuity for retirement purposes. You need to consider the strong ratings. Here, you check the kind of guarantee and assurance the insurance company offers.
Again, you also need to consider the spreads. Check whether they are flexible or fixed. You have to also check the participation rates involved and discover whether they are higher or lower. In most cases, higher participation rates pay better. You have to also check the surrender period and make sure it lasts no longer than 12 years. You need to also check the withdrawal status. Free withdrawals are the ideal. The death benefits involved should also be considered. When you check out all these points, you’re sure to succeed in locating a good insurer that can give you the best of options in indexed annuity.