Frequently Asked Questions About Fixed Index Annuities

How “safe” is a fixed index annuity?

A fixed indexed annuity is a contract between you and the insurance company that issues your contract. Fixed index annuities are subject to state insurance department regulation, which sets standards for the amount of reserves an insurance company must hold to make good on their promises. The annuity guarantees are backed by the financial strength and claims-paying ability of the insurance carrier. Each state's insurance regulator maintains jurisdiction over the insurance carrier and determines the specific amount and level of protection to which the individual consumer is entitled.

Someone told me that my annuity has fees. Is this true?

Yes, all insurance and annuity products have fees. Often, these fees are not transparent to you and are built into the pricing of the product and are instead reflected in the interest you can earn, the income payout rates, surrender penalties for early withdrawals and other contract elements. There may also be additional, specific fees associated with the purchase of additional benefits or riders if you elect them.

How can I learn more about fixed index annuities?

We strongly encourage you to visit the website of the National Association for Fixed Annuities (NAFA) at www.nafa.com.

What is a fixed index annuity?

A fixed index annuity (FIA) is a fixed annuity that provides the opportunity for a guaranteed lifetime income and interest rate while preserving and protecting your principal. You do not pay income taxes on your premium or any interest earned until you take withdrawals or receive income. Unlike traditional fixed annuities, interest may be earned based on positive changes in commonly used financial indices such as the S&P 500 or the Dow Jones Industrial Average. Because the annuity you purchase is indexed, your premium and credited interest can never be lost due to market risk. Keep in mind, that early withdrawals beyond what is permitted in the contract may be subject to surrender penalties, which may reduce the amount of your principal and any interest earned.

Can I liquidate my annuity?

There are many options available for withdrawing your money. The annuities we offer allow you to withdraw up to 10 percent after the first year – without a surrender penalty. In the event of premature death, your beneficiaries can choose to receive your annuity's accumulated value as a monthly or lump sum payment.

Are there really rate caps that limit the amount of interest I can earn?

Unlike most other investment tools, FIAs are insurance products and are designed to provide an increased level of protection against prolonged market downturns. Although the interest rate is limited, your principal and any interest earned are not at risk of loss due to bear markets or weak economic conditions. If the index upon which your annuity is based performs well, you can receive a percentage of that growth in the form of interest credits. Should the market take a nosedive, your principal and earned interest will not be lost, assuming you do not take early withdrawals above the permitted amount.

Aren't there other financial or investment options with unlimited growth potential?

Yes, there are; however, most of these options carry with them the corresponding potential for loss.

How do I know if a fixed index annuity is for me?

As Chay and Katie always point out at their seminars, there isn't a perfect financial tool. It is our belief that consumers’ needs and objectives vary, but as a general rule it is often advisable to move towards more conservative products as they grow older. Our average client is typically at or nearing the age of retirement and wants to help preserve all or a portion of their assets. If you want unlimited growth potential and are willing to assume the investment risk, then a fixed index annuity may not be right for you. If you are concerned about preserving your principal and enjoying a conservative, competitive interest rate on a portion of your retirement savings, then we feel you should contact our Stewart Planning Group family.

Strategies for Financial Independence

To schedule a time to discuss your financial future, contact us at
addresses-chay@stewartplanninggroup.com or katie@stewartplanninggroup.com or call us at 386.673.6697 toda

¹All distributions are subject to ordinary income taxes, and if taken prior to age 59 ½ may be subject to an additional 10 percent federal penalty.