Summerlin Benefits Consulting Q&AAnswer
Oct 17, 2024 - 11:01 AM
A Fixed Index Annuity (FIA) is a type of investment product designed to provide both growth potential and security. Here’s how it works:
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Initial Investment: You make an upfront payment, which can often be funded through a rollover from an existing retirement account like a 401(k) or IRA.
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Index-Linked Growth: The annuity's value grows based on the performance of a specific market index, such as the S&P 500. However, your investment is not directly tied to the stock market, which means you won’t experience direct losses if the market declines.
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Safety from Market Volatility: FIAs offer protection against market downturns. Even if the linked index performs poorly, you typically won’t lose any of your principal investment.
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Tax-Deferred Growth: Earnings in an FIA grow tax-deferred, meaning you don’t pay taxes on the growth until you withdraw funds.
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Lifetime Income Options: Many FIAs offer the option to convert your investment into a stream of income for life, ensuring you won't outlive your resources.
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Withdrawal Flexibility: While there are options for withdrawals, they may come with penalties if taken early. However, some contracts allow for penalty-free withdrawals up to a certain limit.
Overall, a Fixed Index Annuity can be an effective tool for those seeking a balance of growth potential and protection in their retirement portfolio.
