Users' questions

What is the downside of fixed index annuities?

What is the downside of fixed index annuities?

Fixed Index Annuity Disadvantages: 10% IRS penalty on withdrawals prior to 59 1/2 years of age. Early withdrawal penalties or surrender charges for large withdrawals prior to maturity or when withdrawing in excess of the 10% annual surrender-free portion.

Can you lose money with a fixed index annuity?

You can not lose money in Fixed Index Annuities. Another insurance-based annuity allows owners to grow their retirement savings based on the positive movement of a particular stock or bond index while protecting against a stock market crash.

What are the risks of a fixed annuity?

A downside to fixed annuities is that they are much less liquid than stocks, bonds or funds – and investors can face penalties such as a surrender charge for early withdrawals. There can be missed opportunity costs to consider.

Does Suze Orman recommend fixed annuities?

Suze: I’m not a fan of index annuities. These financial instruments, which are sold by insurance companies, are typically held for a set number of years and pay out based on the performance of an index like the S&P 500.

What does Suze Orman say about fixed annuities?

Does Suze Orman like annuities? Orman said she believes “we will come to another harder time financially in the market” and that interest rates will continue to stay low for a long time. So, if you are looking for guaranteed income, you may want to consider an income annuity, she said.

Why do annuities have a bad reputation?

There is one big hurdle to the widespread adoption of annuities: their reputation. That’s partly because insurers have muddied the waters by selling complicated annuities with high fees and surrender charges for consumers who try to cash them in. The opaque pricing made it difficult for consumers to comparison-shop.

What are fixed index annuities and how do they work?

A Fixed Index Annuity is a tax-favored accumulation product issued by an insurance company. It shares features with fixed deferred interest rate annuities; however, with an index annuity, the annual growth is bench-marked to a stock market index (e.g., Nasdaq, NYSE, S&P500) rather than an interest rate.

What do you need to know about fixed indexed annuities?

Guaranteed lifetime income: You can select from 6 or more income options. All of them are guaranteed.

  • the growth in a fixed index annuity is not taxed until you begin to take income or other distributions.
  • Creditor protection: Most states offer annuities some form of creditor protection.
  • How safe is your fixed indexed annuity?

    A fixed annuity is a tax-deferred vehicle, therefore not requiring the interest earned to be subject to ordinary income tax each year. The money inside the fixed annuity also is not driven by the stock market or any other volatile index, therefore making the investment extremely safe.

    What exactly is a fixed index annuity?

    A fixed indexed annuity (FIA) is an insurance product which produces a pension-like guaranteed income in retirement while also offering some liquidity and the opportunity to benefit from market growth.