Set Index Annuities Have Restrictions - Are They Worthy Of Thought?
De BISAWiki
Most Preset Index Annuities (FIA) are deferred annuities. They are doing not provide you 100% from the index being used, to credit your rate of interest. So, some say, will not invest in Fixed Index Annuity . What they are unsuccessful to convey is, most investors are usually not having 100% the market no matter in their technique. In excess of the final twenty years the S&P 500 has averaged roughly 13%.
How much of that did most buyers capture? According to Dalbar's twenty-year study of diversified portfolios, investor's captured just 3.6%. John Bogle, founder of Vanguard family of mutual funds says diversified traders are capturing just one-third with the industry for the past 25 decades.
Most advisors suggest that a prudent annual withdrawal amount for income in retirement would be 4-6%. If traders were really finding 13% annually then why not suggest they withdraw 13% annually for income. That's because they're not making an average of 13%.
Another issue for some is many have heard that with a set index annuity you will not have enough liquidity. Most fixed index annuities have surrender charges that decrease more than the length with the contract. Some are more restrictive than others. With demands from consumers and regulators, insurance companies are designing more liquidity features. For example most set index annuities allow 10% free withdrawal each year after the first year. Some preset indexed annuities even allow 10% free access immediately and if you do not need money in year one, access jumps to 20% in year two. With these features more retirees are looking into these vehicles.
There is no such thing as a perfect place to put money. The set index annuity has as much merit in a person's portfolio as any other strategy. It's safe from current market risk, offers plenty of liquidity, links the growth to the power in the marketplace indexes and defers taxes until you withdraw the funds. It also locks in any gains annually without having to sell. With a set index annuity, you can own the vehicle and the results simultaneously. With stocks and mutual funds, it's easy to buy the investment but hard to own the results. You have to make an emotional decision to sell. Then you can own the results, however, you no longer own the tool. Now where do you put your money?
Obviously, a preset index annuity is not perfect. In most cases you would not put all your money in one system. If you are looking for an alternative from other safe money places like CD's, money markets, or bonds, you may want to learn more about a mounted index annuity.
