With ongoing market volatility and
the stagnation of low interest rates, more
pre-retirees and retirees are looking for
stable, secure retirement vehicles. While
there is no way to control the market
or time interest rates, there are key
fundamentals to the fixed indexed
annuity (FIA) that can help assure your
clients that these powerful tools are the
right choice for these unpredictable times.
Here are four simple FIA design fundamentals for clients who
want principal protection, lifetime income, reliable growth and
1) Preservation of Premium and interest By their nature, FIAs
are considered a safe money alternative. The contract is between
the contract holder and the insurance company for guaranteed
interest and guaranteed income options. Most importantly, all
premium and credited interest can never be lost due to market
This is especially important for risk-adverse clients at the end
phases of their retirement planning who are looking for reliable
results. FIAs offer clients an easy-to-understand strategy that
keeps their contract value safe, with only upside-market exposure.
2) Guaranteed income and Liquidity features Generally, FIAs
have guaranteed income and liquidity features unique to each
company’s product. These features are bedrock to FIAs — clients
want to know that their money is safe, and they want to know
how or when they can access it. This is why easy-to-understand
products and accessible carriers are vital.
For additional lifelong guaranteed income, many clients are
electing guaranteed lifetime income benefit riders. These lifetime
income benefit riders are proving more appealing as retirees look
for ways to generate an income they cannot outlive.
3) tax-deferred Growth A primary advantage of FIAs is the
opportunity to accumulate a substantial sum of money by
allowing clients’ premium and interest to
grow tax deferred. Unlike taxable invest-
ments, taxes are not paid on annuity interest
until withdrawals are taken or income is
received. This allows the contract value to
grow faster, while affording clients an
opportunity to earn interest on both interest
and premium overtime.
For instance, if you take $100,000 and use
a 3 percent annual interest rate, 28 percent
tax bracket, over 20 years; your client walks
away with $180,611 (tax-deferred) or
$153,327 (without tax-deferral). The
numbers speak for themselves.
4) avoidance of Probate A key part of
retirement planning is making sure a client’s
loved ones are taken care of after they are gone.
FIAs, in most cases, allow the beneficiary
expedited access to the accumulated funds
available to them. This preparatory step can
help avoid lengthy, expensive probate
procedures. This is quintessential for clients
who want a smooth transition during what
can be a trying time.
solid fundamentals for a secure future
Since their inception in 1995, FIAs have
provided clients with consistent yields on
their returns. The fundamentals of the
product’s design offer advantages and
opportunities unique to the FIA. Over the
years, time and time again, these fundamentals
have proven that FIAs offer clients more than
just the retirement solutions; they offer
retirement peace of mind.
President & CMO
4 fia fundamentals
for client peace of mind