THE S&P INDEX DROPPED 5 WEEKS IN A ROW!
S&P Stock Index Shows Decline, Annuites Can be a Solution
The S&P Stock index dropped 5 weeks in a row; reducing this year's yield by 1/2!
(Source: Jeffrey Kleintop, CFA, LPL June 6th Newsletter.)
Jeffrey Kleintop, and industry expert; states that jobs are increasing at the best rate since the recent economic decline; but further states: "Last week's reading on the ISM index confirmed that the economy has entered a period of slower growthand stock market performance is likely to be modest and volatile in the month's ahead. However we do not envision a return to a recession or a bear market for stocks."
HOW CAN YOU PROTECT YOUR RETIREMENT ASSESTS AGAINST YEARLY VOLATILITY IN THE S&P INDEX?
This is Easy! 1 Solution is to own an Indexed Annuity.
HOW WOULD AN INDEXED ANNUITY GUARANTEE SAFETY?
Principal and Minimum interest is guaranteed by contract and annual yields have a reset formula: An indexed annuity has unique options for crediting annual interest to your account that
guarantee by contract that credit interest when the index goes up; while locking in that interest yearly.
In other words, if the index goes up, interest is added to your account.
If the S&P goes down the next year; your account is credited with
0 % for that year instead of a negative number. (This means you do not lose the prior year's growth )
You also are credited interest the next year for
any upward growth from the prior year. Instead of waiting for the S&P index to recover to it's starting point; your account would get interest based on changes from year to year up to a ceiling or "cap".
There are choices of how you have your interest calculated; but with each method; your principal is fully guaranteed if you keep your contract until the end of the term. The term choices are usually 5, 7, or 10 years. The safest method is usually an annual reset choice.
YOU CAN ALSO CHOOSE TO INSURE A HIGH LIFETIME INCOME YIELD EVEN IF THE S&P INDEX NEVER INCREASES
How is this accomplished? The answer is you can buy an income rider which reduces your annual yield with most companies by about one half of one percent. This fee is lower than many other investment vehicles and the rider gives you this amazing option: If you stay with the insurance company 10 years and then take income payments monthly or annually you have a guaranteed income payment for life as high as 9.5% of your deposit locked in for life! ( No matter how many payments you take). If you are 65 when you take income and defer payments only 1 year: instead of a lump sum; the yields
can still be as high as 5.9%! .....No matter what the S&P index does.
Cons: There are penalties for early withdrawal of
more than 10% in a year that dissapear at the end of term; similar to a bank account. Your earnings are limited to a cap each year due to the annual reset feature which protects you against loss in any down year.
Pros: You can have an income rider guaranteed by contract that you will have income payments that can not be outlived.
Your accumulated account value is available
probate free at death; with no fees for a will or trust.
Your principal plus a minimum interest guarantee is fully protected if you hold it until the end of the term and take no withdrawals; similar to a c.d. account.
If you decide to walk away with all interest and principal after the period your account can be protected against yearly stock market volatility
If your goal is to use the account for retirement purposes; the interest crediting via the guaranteed income rider is much higher than almost all safe vehicles.
SUMMARY: If you are worrying about S&P yearly volatility and desire tax deferral, safety, and future income: This can be an excellent alternative to other safe accounts. An indexed annuity may not be suitable for you if your goals are short term cash accumulation or if you need more liquidity due to your current financial situation and age. Please consult with your financial professional, CPA, or tax preparer before deciding if an indexed annuity is right for you. This article is presented for informational purposes only and not meant to be given as tax or investment advice. Feel free to call my office at (916) 601-5270 for a complete and free suitability review to see if this concept is the best solution for your retirement accounts.
This article can be copied or distributed as long as it is copied in it's entirety and not modified in any way. Author: Randy Taylor, Copyright Creative Common License 06/09/2011
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