Know These 3 Things Before You Invest in a Fixed-Indexed Annuity
"To evaluate whether a FIA is right for you, you need to understand how you'd make money on the investment, how the insurer profits and how and at what point you can get access to your funds" explains David Stone, Founder and CEO of RetireOne, writing for Kiplinger's. He explains: Offering some upside potential with a guarantee against losses, these investments are principally a trade-off: You transfer some risk to the issuing insurance company in return for limited participation in the gains of an index. On the other hand, equities offer more growth, but … they can't guarantee anything."Who should consider fixed indexed annuities and why? "Because of the low interest rate environment, finance experts like Dr. Wade Pfau and economist Roger Ibbotson have recommended that financial advisers and their clients think of FIAs as another asset class, framing them as an alternative to fixed-income investments like bond funds."
Stone explains the big 3 factors to understand:
- How you earn money with that investment.
- How the insurance company earns money.
- How access to your money may be limited for a period of time.
https://www.kiplinger.com/article/retirement/T003-C032-S014-know-this-before-you-buy-a-fixed-indexed-annuity.html
Check out this article by Jeff Rose from Forbes on Fixed-indexed or Equity-indexed annuities:
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