THE ABCs of Fixed Indexed Annuities

It used to be that stocks and bonds were all you needed. Not anymore. Today you have more options.

Fixed-Indexed Annuities are tied to major stock market indexes and not to the performance of individual stocks or mutual funds, providing complete safety of principal and interest rate guarantees. They are a fixed financial product, they are not a securities product. Fixed-Indexed Annuities are an excellent alternative savings vehicle, a choice for people who are planning to retire, or are already retired. Again, not only is there "zero market-risk" associated with fixed-indexed annuities, but when the market goes up and you have a gain in your account, it is locked-in and yours to keep. It cannot be taken away, you cannot lose your gain.

Fixed Indexed Annuities provide the consumer with "zero market-risk", with the potential for moderate returns. Fixed-Indexed Annuities appear in the middle of our "Spectrum of Risk and Return". They provide a rate of return expected to be greater than that of most fixed products, but less then some market sensitive products. The market-risk associated with Fixed-Indexed annuities is still Zero! Only fixed-indexed annuities can do this.

Fixed-Indexed Annuities Guarantee:

• You cannot lose your principal (the money you invest).
• Once you have a gain in your account it is locked-in and yours to keep.
• You will not pay taxes on any gain, until you make a withdrawal.
• A lifetime minimum interest rate guarantee.
• A choice of guaranteed income options you cannot outlive.

We want to expand on point #5. If a consumer decides he or she needs a monthly income check, he or she can annuitize and receive a monthly income they cannot outlive, or they can simply take periodic withdrawals if they prefer.

The majority of fixed Indexed annuities in the market place utilize the S&P 500 Index. The S&P 500 is recognized worldwide as the premier benchmark for U.S. stock market performance. The S&P 500 does not simply contain the largest stocks; rather, it covers leading companies from leading industries. The S&P 500 represents a broad cross-section of the U.S. equity market, including common stocks traded on the New York Stock Exchange, American Stock Exchange and the NASDAQ Stock market.

Again, fixed-indexed annuities provide upside potential with protection from Market Index Losses. What if you had a $100,000 and…

• when the S & P 500 Index grows, your account value grows,
• when the S & P 500 Index declines, your account does not lose value,
• when the S & P 500 Index has a negative return, your Index credit can never be less than zero.

Example of "How a Fixed-Indexed Annuity works".

Again, Fixed-Indexed Annuities are an excellent savings choice for people who are planning to retire, or are already retired. Not only is there "Zero-risk" associated with fixed-indexed annuities, but when the market goes up and you have a gain in your annuity, it is locked-in and yours to keep. It cannot be taken away.

If you lost 33% in a mutual fund in a particular year, you would need a 50% increase the following year to get back up to where you were the year before. If your money had been safely placed in a fixed-indexed annuity (as in our example), you would still have $121,000 in your account at the end of year #3, because once you have a gain it is locked-in and yours to keep.

Here is where it really gets interesting. In our example, on day #1 of year #4, the S&P 500 is at an index value of 1000, and your account value is still worth $121,000. You now have the opportunity to ride the market, the S&P 500 let's say, all the way back up to an index value of 1500 and profit every step of the way, locking in your gains annually.

If the S&P 500 were to climb to just 1100 by the end of year #4, that's another 10% gain on top of the $121,000 you had already locked in, giving you a new account balance of $133,100 at the end of year# 4.

If the S&P 500 were to continue it's recovery and climb to just 1210 by the end of year #5, that's yet another 10% gain on top of the $133,100 you had already locked in, giving you a new account balance of $146,300 at the end of year# 5. Look at where you started on the S&P 500, "1215", you are not even back to where you started, and your account value has grown to $146,300. This is a great product for retirement assets. The stock market goes up and down, but you only participate when the market goes up!

American Annuity Advocates urges consumers to remember that fixed-indexed annuities are savings instruments.

Fixed-indexed annuities were designed to be competitive with other savings vehicles that also protect principal and credited interest. Fixed indexed annuities shield consumers from market-risk, and provide for the upside potential of only positive market increases. There will be times when index annuities outperform mutual funds and variable annuities, but remember that is not what they were designed to do. Stocks and mutual funds provide consumers the opportunity for upside potential beyond savings products, but they also provide consumers with the opportunity to suffer market losses, and the costs associated with these investments prohibit growth.

The bottom line is retirees simply may not have the time to stomach the ups and downs of the stock market. With fixed-indexed annuities, they don't have to, because retirement minded individuals who choose fixed-indexed annuities, never run the risk of losing their money. Retirement savings placed in fixed-indexed annuities remain protected.