In many ways, fixed index annuities are considered to be a “best of all worlds” financial vehicle. That’s because they can provide you with the opportunity to meet – or even beat – inflation, while at the same time protecting your principal from negative market environments, and giving you an income you can count on retirement, regardless of how long you may need it.
There are some other benefits that you could also have, as well, depending on the annuity and the carrier. For instance, some of these products allow you penalty-free withdrawals if you are diagnosed with a terminal illness and/or if you need to reside in a skilled nursing facility.
Plus, there is oftentimes a death benefit attached to fixed index annuities, so if you, the income recipient, were to pass away before receiving all of your contributions back, your beneficiary will receive the difference. In some cases, the annuity may even offer a “stepped up” death benefit that grows over time.
There are some drawbacks to relying only on an annuity for your retirement income, though. That’s because most – or possibly even all – of the income you receive may be taxable. So, in an era where taxes are more likely to go up than to go down in the future, it’s wise to have at least some tax-free income.
One way to do that is to own a Roth IRA. While your contributions to a Roth are after-tax dollars, the withdrawals are tax-free. So, you can be assured that, no matter what Uncle Sam is “charging,” you’ll be able to put 100% of your money in YOUR pocket. Another tax-free income strategy is to take policy loans from an indexed universal life insurance policy.
What exactly is indexed universal life insurance?
Indexed universal life, or IUL, is a permanent form of life insurance that provides death benefit protection, along with tax-deferred cash value build-up that can be accessed via taxable withdrawals, or tax-free loans.
Fixed Index Annuities vs Indexed Universal Life
| Rate Guarantee Period | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| 3 Years | 10% | 10% | 9% | |||||||
| 5 Years | 10% | 10% | 9% | 9% | 8% | |||||
| 6 Years | 10% | 10% | 9% | 9% | 8% | 8% | ||||
| 8 Years | 10% | 10% | 9% | 9% | 8% | 8% | 7% | 7% | ||
| 10 Years | 10% | 10% | 9% | 9% | 8% | 8% | 7% | 7% | 6% | 5% |
Although it’s not recommended that you put “all of your retirement income eggs in just one basket,” it is a good idea to explore the various options that are available to you, as well as to understand how they may be taxed.
Putting a Reliable Retirement Income Strategy in Place
If you’re in the process of setting up a retirement income plan for the future, we can help. At Annuity Gator, we’ve made it our mission to help consumers sort out all of the in’s and outs of annuities, as well as how these financial tools may – or may not – fit into your overall financial plan.
If you’re considering an annuity, or even if you just have questions about how these financial vehicles work, contact us at (888) 440-2468, or send us an email through our secure online contact form to set up a time to chat with an annuity specialist.
