Fixed and Fixed Index Annuities 101
Fixed Annuities are basic but can serve a purpose. Typically, they offer a fixed rate for that year usually around 1.5-4.5% depending on their current rates. The rates can change but most stay around in the 3% area to help outpace inflation. Some offer some other benefits like long term care features or skilled nursing. Fixed annuities are mostly set up to help people’s money last them longer, so they don't run out of money.
Fixed Index Annuities are exciting. They take the best of both worlds from other types of annuities and put them into one type of annuity. They protect you from any negative markets and yet help you get better rate of return on your money when the markets go up. There are other bells and whistles that these products offer such in the form of riders as Automatic Step-up Income, Skilled Nursing, Home Health Care, Disability, Terminal Illness, etc...
Some offer a fixed rate, others offer a rate that fluctuates based on a market index such as the Dow Jones or S&P 500, etc. Some will have a limit or cap rate as part of the agreement, others will have no cap limits on the gains, instead they take a percentage upfront (usually 1.5-2%) and you get to keep the rest.
Some annuities offer income riders. These can range from a 4-14% automatic step up every year regardless of what the index does and is applied to your income base to be used when you want to exercise that rider for income needs later. Some have bonuses that help get you 10-50% in a short period of time if income is a more important concern soon.
A lot of annuities will offer Skilled Nursing Benefits and Home Health Care Benefits where the income payments can double or even triple if you there is a Skilled Nursing need. As well, if you can't perform 1 or 2 of the daily living activities and there is a need for Home Health Care, some of these annuities offer features that you can receive 1.5% or double your income payments for that need. Some even offer Long Term Care benefits as well. These are nice added features you can get with your annuity and you don't have to go through any crazy health screening to get the benefits. In most cases they just want to know if you have currently had a terminal illness. Like I said, it is very easy to qualify.
Cost is always a reason why and why not to go with a specific program. The neat thing about Fixed Annuities and Fixed Index Annuities is most of the time there are no costs unless you elect to add different riders. But the cost is minimal in comparison with other types of annuities and offers you the protection against lost and some guarantees that other programs don't have.
The problem is there are many variations of these types of annuities and each company or provider has several products that suit different financial objectives. Some give bonuses to the account value up front, some offer an automatic income step up on their income base amount, other have Home Health Care, Skilled Nursing, or Long-Term Care, some don't.
It can get confusing and frustrating on researching which is the right direction or program for you. Our agents can sit down at no cost to you and take the time to figure out if these types of vehicles are right for you.