The 20th Anniversary of Fixed Index Annuities

This week Fixed Index Annuities (FIAs) reached a milestone – their 20th anniversary! On February 15th, 1995, Fixed Index Annuities were first introduced to consumers as a key product for helping plan a secure, dependable source of income for retirement.

FIAs were first created as a reaction to the economic volatility that darkened the bond and stock markets in 1994.[i] Despite the economic growth that characterized the 1990s, traditional financial options suddenly looked less dependable and an opening was available for a product that could be depended upon in times of economic turbulence to retain its principal and always provide a certain degree of growth – no matter the market conditions.

Photo: Classic by Stephanie Sicore – License:

Photo: Classic by Stephanie Sicore – License:

Consumers flocked to the new instrument and over the next 20 years FIAs proved to be a key part of a strong, trustworthy portfolio designed to provide confidence in later years. The proof is in the pudding – sales growth of FIAs over the last 20 years has been considerable. As Jack Marrion, president of Advantage Compendium, a financial research and consulting firm, found, “since 1995, roughly $400 billion in fixed index annuities have been purchased by millions of consumers.” [ii]

Today, the marketplace bears striking similarities to the conditions that first fostered FIAs. In the aftermath of the Great Recession, growth is once again on an upswing, but mindful of the recent economic decline and shocks, there’s still an appetite among consumers for dependable, safe ways to plan for a fulfilling retirement.

So, what does the future for FIA’s look like?

  1. The customer is changing. Traditionally, FIAs were purchased by those beginning to seriously consider their prospects for retirement. In a phrase – Baby Boomers. But, with the effects of the Great Recession still lingering, FIAs are now increasingly appealing to younger generations, even millennials, who understand the need for financial security and are worried about the future. As a Wells Fargo survey found, that more than a third of Millennials expect to receive 0% of their retirement income from Social Security, and another 21% say they have no idea what to expect. As young people advance in their careers, the purchase point for FIAs looks likely to shift to younger demographics than has conventionally been the case.
  2. FIAs will look different. Fixed Index Annuities have evolved over the years and the evolution is bound to continue. On an ongoing basis companies and agents are finding innovative ways to determine new indexes and annuities that offer consumers greater choice and flexibility. Such forward-thinking is a key reason FIAs have been so successful for both contract owners and their beneficiaries. That innovation is bound to continue.
  3. FIAs will become better known among everyday consumers. Traditional retirement options such as pensions are dwindling. It used to be that you could hold a single job for 25 years and be able to retire comfortably at an early age and on a healthy pension. As Towers Watson, a business consultancy, found, in the last 15 years, the portion of the U.S.’s largest companies offering defined-benefit pensions to new workers has fallen from 60 percent to 24 percent. Further, with individuals switching jobs on a more frequent basis and employers looking for new retirement options to offer employees, FIAs will increasingly become a go-to product for those looking to finance a rewarding, balanced retirement.

It’s been a strong, exciting 20 years for FIAs and the future is bright. Customers who may have never heard of a Fixed Index Annuity in the past will progressively consider them at younger ages and companies will continue to develop new products that reach wider audiences and satisfy the widespread desire for a secure and comfortable retirement. When it comes to considering an FIA, Benjamin Franklin put it best, “Never leave that till tomorrow which you can do today!”

[i] Fixed Indexed Annuities Celebrate 20 Years
[ii] Fixed Indexed Annuities Celebrate 20 Years

Photo: Classic by Stephanie Sicore – License:

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5 Best Reads on Retirement

2014 was a big year in retirement news and research, from women’s retirement savings still lagging behind men’s to LGBT Baby Boomers and soon-to-be-retirees continuing to experience unique hurdles in preparing for retirement.

The Washington Post explored some of the reasons why women are still saving and contributing less to retirement accounts than men, the Associated Press detailed the hurdles LGBT Baby Boomers face when planning for retirement, and the Washington Post gave an in-depth look at a startling study that showed nearly a third of Americans approaching retirement have zero dollars saved for retirement.

Despite the gloomy findings, one bright spot in 2014 was a report showing that millennials, young people whose formative years were tempered by the Great Recession, are starting to save earlier than Baby Boomers.

As each of these groups—Baby Boomers, millennials, women and soon-to-be-retirees—look at retirement planning, fixed indexed annuities (FIAs) have become an increasingly popular tool in ensuring their retirement plan is balanced.

In case you missed them, here are the top 5 stories and retirement news from 2014.

1) Almost 20 Percent of People Near Retirement Age Have Not Saved for It
Washington Post
By Jonnelle Marte

“One in five people who are near retirement age have zero money saved.

Overall, 31 percent of people said they have zero money saved for retirement and do not have a pension. That included 19 percent of people between the ages of 55 and 64, or those closest to retirement age.

What’s going on here? A lot of people said they rarely thought about retirement, at least not until it was too late. About 41 percent of people ages 18 to 29 said they never thought about retirement planning, a number that understandably declined to 20 percent for people above the age of 60.”

Read full story at the Washington Post.

2) Women Are Still Way Behind Men When it Comes to Retirement Savings
Washington Post
By Jonnelle Marte

“Women are just as likely to put away some money for retirement as men — but they are still way behind their male counterparts in total retirement savings, a new study shows.

Men had an average of $139,467 in their individual retirement accounts as of 2012, compared with the average of $81,700 that women had stashed in their IRAs, according to a report released Wednesday by the Employee Benefit Research Institute, a Washington-based research institute that focuses on health, savings and retirement issues.”

Read full story at Washington Post.

3) Fixed Indexed Annuities to Hold ‘Bright Spot’ in 2015

“Fixed indexed annuities will continue to be a ‘bright spot’ for the annuity market in 2015 and the industry can expect a ‘continued shift’ of annuity purchases in the new year toward principal-protected and income-producing products, as baby boomers confront their retirement realities.”

Read full story at ThinkAdvisor.

4) Millennials Save for Retirement Earlier Than Baby Boomers, Survey Finds
By Alicia Adamczyk

“All of those reports encouraging Millennials to start saving for retirement as soon as possible may be paying off, literally. According to the 15th Annual Transamerica Retirement Survey, performed by the nonprofit Transamerica Center for Retirement Studies, Millennials are an ‘emerging generation of retirement super savers,’ with 74% starting to save for retirement at an ‘unprecedented’ median age of 22, or 5 years sooner than Gen Xers and a staggering 13 years sooner than Baby Boomers.”

Read full story at Forbes.

5) LGBT Baby Boomers Face Tough Retirement Hurdles
Associated Press
By Ken Sweet

“For many, decades of workplace discrimination impaired their earning power. The AIDS crisis caused lasting financial and psychological damage, particularly for gay men. And legal pitfalls within Social Security, the cornerstone in any senior’s financial planning, have left gay boomers ill-equipped for retirement.”

Read full story at ABC News.

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Prepared for Retirement? Higher Education Professionals Are

According to a new Teachers Insurance & Annuity Association survey, higher education faculty is better prepared for retirement than the general population – setting a great example.

On top of saving in their employer-sponsored retirement plan, 42 percent of higher education employees have saved in an IRA compared to 34 percent of the general workforce. While 36 percent of college faculty and staff say they have seen a financial advisor, only 22 percent of the general population report that they have done so.

Confidence is key: Giving thought to retirement preparations contributes greatly to your financial confidence.  Eighty-three percent of tenured and tenure-track faculty felt ‘very or somewhat’ confident they will have enough money to live comfortably throughout their retirement years, compared to just 55 percent of workers overall.

Employees in all industries can adopt a “plan now, plan for the future” approach by consulting a financial professional or insurance agent to determine the best route to achieve a safe and secure retirement.

One option to consider when speaking with your financial professional is a Fixed Index Annuity (FIA), a financial product that protects your principal and allows the potential for growth linked to an index, such as the S&P 500.

Visit for more information and check with your financial professional to determine if a fixed indexed annuity is right for you.

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Trends for Fixed Annuities in 2015

Once simply viewed as a safe way to guarantee a lifetime stream of income, fixed annuities have emerged as a balanced instrument that offers the potential for wealth accumulation. This potential has made fixed annuities a top choice for many soon-to-be retirees, and there is no sign of this changing in 2015.

Insurance News Net released the following list of trends for fixed annuities in 2015:

  1. The end of quantitative easing (QE) will create uneasy investors. QE is the process through which the Federal Reserve bought treasury bonds to spur private spending and growth during and after the economic downturn. It is unclear how the stock market will perform with the Federal Reserve having ended quantitative easing.
    • “What many don’t realize about delaying their fixed annuity purchase is that they may be hurting their overall accumulation potential. A fixed annuity’s compounded growth and tax-deferral status can grow savings faster than one may think. A year of tax deferral growth can have a great impact in your accumulation.”
  1. Purchasers are getting younger.According to a recent LIMRA (Life Insurance and Market Research Association) study, half of all annuity purchasers are under age 60.This trend shows increasing awareness and concern around retirement preparedness among people of all ages. An exciting development!!
    • “Fixed annuities are a practical option for financially conservative clients — particularly those who want to see a return on their investment. Many who are preparing for retirement have a low risk tolerance; a fixed annuity can work well for those who don’t want to gamble with money they’ve worked so hard to accumulate for retirement.”
  1. Watch for new products. Insurance companies are always examining the needs of their customers and reviewing their product portfolio to ensure customers get the best retirement saving options, tailored to their specific needs.
    • “Many carriers are hoping to create annuities that help expand options for consumers while providing the same rate of return.”
  1. The benefits of wealth transfer.A fixed annuity can be used to transfer money from a purchaser’s estate directly to select beneficiaries, offering additional flexibility and freedom.
    • “Death benefits payable to their heirs, especially in large sums, could actually be a burden. The taxes associated with the proceeds could place beneficiaries in a different tax bracket and/or eat up a significant portion of an inheritance. Fixed annuity payments can help spread out that impact.”

The overriding trend is that when preparing for retirement in America, risk tolerance is extremely low. As you think about balancing your financial retirement portfolio in 2015, one option to ease your risk is a fixed indexed annuity (FIA). FIAs protect you from market volatility, while also allowing the potential for additional interest based on an external index. With a FIA, your principal is protected, and the value can increase based off of index growth, but will never decline.

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Hope for the Best, Prepare for the Worst

According to recent statistics from the Alzheimer’s Association, the prevalence of Alzheimer’s is unfortunately on the rise in the United States as baby boomers age. Currently, Alzheimer’s is the 6th leading overall cause of death in the United States and the 5th leading cause of death for those aged 65 and older, killing more people than prostate cancer and breast cancer combined.

Alzheimer’s disease is also the most expensive condition in the nation. Although Medicare and Medicaid cover some of this cost, the total out-of-pocket spending for individuals with Alzheimer’s and other dementias is estimated at $36 billion annually.

As you consider planning for retirement and your old age, it’s important to keep in mind that you should hope for the best while preparing for the worst, such as these high, long-term health care costs like those faced by people with Alzheimer’s.

One option to consider is investing in a fixed indexed annuity—a tax-deferred product offered by life insurance companies that offer low risk, guaranteed income and protection for market ups and downs.

You can have additional peace of mind by purchasing an annuity with a nursing home or long-term care rider to access your annuity funds free of federal taxes if you need long-term care either at home or in a nursing facility. And if you don’t need long-term care or want to redeem your annuity for other purposes, you can still redeem it for its accumulated value when it matures.

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Preparing Your Finances for the New Year

With 2015 right around the corner, many people find December to be the ideal time to review their finances and retirement planning and make adjustments for the coming year. Financial professionals suggest that the end of the year is the right time for steps including:

  • Reviewing your emergency savings fund and cash flow planning for the upcoming year;
  • Rebalancing your investment accounts to make sure you’re meeting your financial goals; and
  • Making sure that you’ve funded your retirement accounts as planned for in 2014 and set goals for 2015. The IRS has adjusted the contribution limits for 401(k) and other retirement plans in 2015 – be sure to review the new limits and set your goals accordingly.

As you think about balancing your financial retirement portfolio, one tool to be sure to consider is a fixed indexed annuity (FIA), a financial product offered by life insurance companies. The advantages of FIAs include:

  • Peace of mind with a guarantee: Indexed annuities offer a guaranteed rate of return, along with the potential for additional interest credited based on an external index. Once interest is credited, it will compound annually and can never be lost.
  • Protection for your nest egg: Your premium and credited interest can never be lost due to index volatility. Your indexed annuity is a contract backed by the financial strength of the insurance company.
  • Tax-deferred growth: Like 401(k)s and traditional IRAs, FIAs offer tax deferral on your earnings. However, unlike 401(k)s and traditional IRAs, there is no government cap on contributions, allowing you to save more while enjoying tax-deferred growth potential.

Visit for more information about FIAs and consult with your financial professional to determine if a fixed indexed annuity is right for you.

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Fixed Indexed Annuity Riders Made Simple

Unsure if an FIA will fit your retirement plan? In the video Using Annuity Riders in Retirement, personal finance expert and author Laura Adams provides a simple explanation of FIAs and how optional riders can help safeguard your retirement savings.

The video includes easy-to-understand overviews of the following annuity riders:

  1. Nursing Home or Long-Term Care Riders, which allow you to access your annuity funds if you need long-term care either at home or in a nursing facility.
  2. Terminal Illness Riders, which allow you to access your annuity funds immediately without any fees or penalties if you become terminally ill.
  3. Lifetime Income Riders, which provide a guaranteed income stream from your annuity for your entire life.

Laura Adams is a personal finance expert, award-winning author, spokesperson, and host of the top-rated Money Girl podcast. For more information about using FIAs to manage health care costs in retirement, you can read Laura’s latest article on The Huffington Post.  

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Take Back Your Retirement: Begin Planning Now

Thanks to advances in health care and general well-being, Americans are living longer than ever. In fact, there are 11 states with more than a million people over the age of 651. And once people reach 65, men can expect to live another 19.3 years and women can expect to live another 21.6 years2.

Many older Americans dream of a relaxed retirement, spent travelling or visiting family or taking up a long-deferred hobby. But unfortunately, many aren’t able to do this because they haven’t been able to save enough for the increasing financial demands of retirement.

So instead of relaxing retirements, many older Americans are continuing to work. In fact, in a recent study 28.1 percent of Americans aged 60 and above said that their retirement plan was to “keep working as long as possible.”3

It is important to begin financial planning as soon as possible to ensure that you have a steady income that allows you to have the retirement you always dreamed of.  As you consider plans for ensuring a steady retirement income, one option to consider is a Fixed Index Annuity (FIA), an insurance product that pays you income, as part of a balanced portfolio and offers nest egg protection from market volatility.

An FIA will provide income options providing retirement income you can depend on for life. Unlike having funds in a retirement account such as a workplace 401(k) or an Individual Retirement Account (IRA), an FIA, with optional riders, can guarantee to give you an income stream that will last for your entire life.

To learn more about FIAs, be sure to watch this video: What Is a Fixed Indexed Annuity?

For more information on the data in this post, visit 1National Institute on Aging, 2US Social Security Administration, and the 3Board of Governors of the Federal Reserve.

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Tax Benefits of Using a Fixed Indexed Annuity in Your Retirement Plan

By: Laura Adams

Cutting your taxes every way that’s legally possible is a smart way to keep more of your hard-earned money. Additionally, paying less tax on the growth of your retirement savings allows you to keep every dollar invested, so you can grow a larger nest egg that generates plenty of income when you need it.

There are a variety of tax-deferred accounts that you might choose, such as a workplace 401(k), a traditional Individual Retirement Arrangement (IRA) or an annuity. Using these types of accounts can be a huge advantage when compared to investing through taxable vehicles, such as brokerage accounts, CDs and bonds that require you to pay tax on growth every year.

A fixed indexed annuity is an insurance product that pays you income in exchange for your premium payment(s) according to a contract. It allows you to enjoy potential growth that’s linked to a market index (such as the S&P 500), while protecting your savings from any downside loss.

You can use this calculator to compare the tax advantages of saving with an annuity versus a taxable account: What Are the Tax Advantages of an Annuity? (Calculator)

Here are 3 tax benefits you’ll enjoy when you add a fixed indexed annuity to your financial portfolio outside of a qualified retirement account:

Tax Benefit #1: Your interest growth is tax-deferred

With a fixed indexed annuity, your deposits into the account are not tax-deductible; however, you don’t owe tax on your interest earnings until you or your beneficiaries receive money from the account.

Tax deferral is a powerful benefit because the money in your account can grow even faster. When compounded over time, your total savings can increase, generating more income for you to enjoy in retirement.

Tax Benefit #2: No annual contribution limits

Retirement accounts, such as a workplace 401(k) and a traditional IRA, come with annual contribution limits set by the Internal Revenue Service. On the other hand, annuities don’t have any government-imposed contribution limits.

You can save as much as you want every year and enjoy higher potential amounts of tax-deferred growth with a fixed indexed annuity.

Tax Benefit #3: Annuitized payments aren’t fully taxed

One of the most common ways to take money from an annuity is through regular payments over your lifetime, known as annuitization. These payments are a combination of your principal and interest earned, which means a portion of your income stream (your principal) won’t be subject to tax during retirement.

In addition to these great tax benefits, you can also include one or more riders to a fixed indexed annuity for additional financial benefits and security. For instance, you can opt to have lifetime income, guaranteed payments to your heirs or coverage for long-term care.

Using a fixed indexed annuity gives you the flexibility to cut your taxes and accomplish multiple financial goals using just one product. To learn more, be sure to watch this video: What Is a Fixed Indexed Annuity?

See also: 5 Myths About Fixed Indexed Annuities You Should Ignore

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