Quarantined, isolated and confused
Today, I am sitting in my home, self-isolated, keeping a social distance away from the rest of the world, and I have a slight tickle in my throat. I am watching TV with one eye on the stock market as the Dow drops lower and lower, and with the other eye and ear watching and listening to the 24-hour-a-day coverage about the Coronavirus pandemic.
I am asking myself, what is happening to this world? Where are we going to turn for answers? I don’t know if the stock market is going to go up or down tomorrow. I do not know how many more people are going to die from the Coronavirus before a cure is found.
There is one thing I do know. Before the Coronavirus threat, if I had a tickle in my throat, I would take a cough drop and continue with my work. But today…I don’t know which way to turn.
I’ll let the experts answer the questions about the stock market and the Coronavirus. As an insurance and retirement professional, I will dedicate my attention to what I do best, helping solve my client’s retirement concerns.
The question, “Which way should I turn?” came up recently with a client who is about to retire. He and his wife are concerned that their retirement accounts are shrinking from market losses. He asked me how safe Index Annuities are. I explained to him that fixed indexed annuities are safe; their principal is protected and secure from market risk, and the strength of the insurance company backs their investment.
Additionally, because the insurance company does not invest their money in the stock market, they will no longer experience market losses. They told me that they have done their research and heard index annuities are offered both with and without an income rider.
They asked me to help them decide which option best meets their needs and goals. This is how I explained the advantages of both.
Features of an index annuity without income rider:
Index annuities without income riders offer you several options as to when to access your funds. It is primarily intended for clients seeking the highest possible account value and a long-term retirement savings vehicle.
- Funds may be withdrawn from your annuity account at any time.
- You’ll have penalty-free access to 10% of the total account value in years 2-10
- If your funds are from a pre-tax account and you are over 72 years old, you may begin RMD withdraws at age 72 and discontinue your 10% withdraws.
- Funds may also be withdrawn from the interest earned in your annuity, or from annuitization
- Access to funds may be penalty-free in the event of a terminal illness or need for long-term nursing care (LTC)
- A death benefit may be paid to a beneficiary.
- There are many interest rates options to choose from, such as fixed interest rates or hypothetical indexes, some without caps.
There are some critical factors you must consider before choosing an index annuity without lifetime income. It is not guaranteed. How long income will last depend on the amount withdrawn from the annuity and the performance of the index selected.
Features of index annuities with an income rider:
You receive all the benefits of an annuity without an income ridder with these additional benefits:
- An Income rider added to an index annuity offers the owner a guaranteed lifetime income rate, without market risk.
- A variety of interest options in which you can select. Some are hypothetical and depend on the performance of the index chosen, and some offer guaranteed compounded interest rates, as high as 7%.
- Many index annuities with income riders provide up to two times the income value to pay for (LTC).
If you desire a product that provides the highest accumulation possible, an Index annuity without an income rider can be a good annuity solution.
If you desire a product that provides guaranteed lifetime income and (LTC) enhancement, an income rider is a right solution.
If you don’t know which way to turn with your retirement decisions, I recommend you turn to your trusted advisor for help.
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