Beyond the 401k and IRA: An Equity Indexed Annuity

401k retirement accounts and IRAs, Roth and Traditional, are excellent savings devices for retirement. By diligently contributing to these kinds of retirement accounts, you can count on having a significant nest egg once you reach retirement. But what if you’ve maxed out the amount that you can contribute to an IRA or a 401k for the year? Are there any other options that offer a better return than savings accounts or certificates of deposit? If you’ve reached the threshold of contributions for traditional retirement savings vehicles and you have a lump sum that you’d like to put to work earning interest, an equity indexed annuity may be an excellent option for you.

First of all, an equity indexed annuity, also called a fixed indexed annuity, is not an “investment product” in the traditional sense of the word and is not subject to market losses. Your money is used to create a contract between you and an insurance company. What an equity indexed annuity offers you is an opportunity to earn interest based on the growth of a stock market index, such as the S&P 500, with none of the downside risk. Your equity indexed annuity earns a guaranteed minimum rate of return, and can reap interest earnings up to a certain percentage, called a cap. These interest earnings and the original principal are backed by the full faith and credit of the issuing insurance company. While it may seem more attractive to shoot for the highest returns you can potentially receive by investing in the stock market, sometimes you just want a fair return accompanied by safety. An equity indexed annuity gives the consumer both stability and impressive interest earnings—qualities that are attractive to those saving for retirement.

Another bonus to equity indexed annuities is that they are tax-deferred. With most investment products, you have to pay capital gains taxes each year. With an equity indexed annuity, you do not pay taxes on interest earnings until you withdraw money from the annuity. The money that you’d normally use to pay taxes is kept within the annuity to continue to compound and earn additional interest.

Annuities are usually considered to be financial products for retirees or for those individuals nearing retirement. In fact, an equity indexed annuity can be a great savings tool for anyone looking to lock in favorable returns with no market risk. An equity indexed annuity is a safe haven for your money, one that earns notable returns and maximizes your savings for the future, retirement or otherwise.

Our Annuity Specialists can help you chose the equity indexed annuity product that fits your needs. Please call our licensed Specialists at 1-888-837-4226 to start learning more about equity indexed annuities.