Fixed index annuities are special insurance contracts which people enter into with insurance companies during their working lives. These schemes offer the policyholders a regular income stream when their policies terminate their retirement or death.They just need to make upfront annual contributions to the insurance companies to avail this post-retirement income. The money which accumulates under the insurance schemes earns interest on the basis of the positive growth of external stock market indexes. These could bethe S&P 500, the Nasdaq, the Dow Jones Industrial Average, or the Russell 2000.
Arbor Financial Melbourne – How do fixed index annuities schemes work for retirees?
Arbor Financial Services of Florida, Inc. is a leading investment advisory service company in America and the Retirement Income Store franchisee. The professionals of this corporate enterprise specialize in offering a diverse range of wealth management services to people from diverse backgrounds. They aim to enhance their clients’ wealth and post-retirement income.
In the opinion of the Arbor Financial Melbourne team of specialists, many young people might show interest in fixed index annuities schemes. Most of them might be starting their careers and want to save enough money to lead a comfortable post-retirement life. However, they first need to know how these insurance schemes work beforebuying a suitable one. All fixed index annuities comprise of two phases which are:
Accumulation
This is the stage where the policyholders make annual contributions to the insurance companies for a specific period. These sums accumulate to earn interest on the basis of the positive growth of the external stock market index. However, the policyholders’ contributions are immune to any financial risks as they do not directly participate in the market. This protects them from incurring losses.
Tax-deferred growth
The policyholders are not liable to pay any taxes on the sum which accumulates on their fixed index annuities. The lump-sum money becomes taxable only when their schemes terminate and start withdrawing it for their retirement. This tax-deferred benefit enables the money in fixed index annuities to grow faster than other investment schemes.
To establish fixed index annuities, young people first need to buy a suitable contract from reliable insurance companies. They can pay a lump sum contribution, transfer funds from their existing investment schemes or make multiple deposits to these corporations. They can then tell the companies whether to invest their money in a single stock market index or multiple ones. The annuities will generate returns depending on the market performance of the underlying indexes the policyholders choose for their schemes.
The benefits of investing in fixed index annuities schemes for young people are as follows:
- Ensures them a stable regular income stream,
- Protects the original policyholders’ contributions from negative market volatility, and
- Assures the contributions under the annuity schemes grow at a compounding rate.
The Arbor Financial Melbourne team of experts concludes by saying that investing in fixed index annuities is ideal for people to generate a stable retirement income source. However, it is imperative for them to thoroughly go through these schemes’ offer documents before investing. They need to understand the schemes’ terms and conditions before making any final decision.
