Mountain View Insurance – Fixed Indexed Annuity Options
A fixed indexed annuity allows for a rate of return linked to a particular index, hence Fixed “Index” Annuity. This is an advantage to you because it allows for larger potential gains when compared to a conventional fixed annuity. They also have the principal protection which guarantees your principal will not decrease.
Fixed Indexed Annuity – Index Options
There are many indexing options available for annuities because insurance companies all have their own specialty products. So it is true that annuities vary from company to company. Here is a short list of different indexes insurance companies offer to link your annuity to (there are many more options)
Index Options
- S&P 500
- Russell 2000
- CROCI Index
- Zebra Edge
- JP Morgan Mozaic
Fixed Indexed Annuity – Growth Potential
Fixed Indexed Annuities provide 100% principal protection and more growth potential than a fixed annuity. This is why we see people diversify into them.
Remember there is 100% principal protection means that regardless of the market, or index in this case, your original principal will not decrease. The value of your account tracks the appreciation of a given index but the insurance company will either put a cap or spread on the growth. This is the trade-off for having principal protect.
Growth Potential – The Index
Depending upon the index you choose allows for different growth potential. Every insurance company offers different indexes and most even allow you to diversify within their suite of indexes. For instance, you may be able to put 60% in a fixed bucket and the remainder in the S&P 500 account.
Growth Potential – Cap and Spreads
The trade-off on 100% principal protection is the cap and spreads the annuity company puts on the indexed account. A cap sets a predetermined percentage value that the annuity account “caps” out at. For instance, if an annuity says 6.5% capped rated S&P 500, that means that the most the annuity will credit your account value per year is 6.5%. This is the trade off for the 100% principal protection. Spreads are a percentage value that is taken from any yearly account appreciation being credited to the annuity account value. For instance, if the annuity index appreciates 5% and the spread is 1% then your account value would increase on the “spread” which is 4%.