Most 401k's and IRA's are heavily invested in the stock market during their accumulation years which creates the potential for downside market risk. I think we all remember October 2008 where millions of people lost over 40% to 50% of their retirement accounts in a single month. It was a devastating time for millions of people and forced a lot of people's retirements to be put on hold.
An IRA also has limits on how much can be contributed each year. If you are under the age of 50 you can only contribute up to $5,500 per year towards all of your IRA accounts. If you are 50 or over you can contribute up to $6,500 per year.
Wouldn't it be great if there was a retirement product that grew based on the rise of the stock market without the exposure to downside market risk, the ability to contribute as much as you want every year AND have the tax deferral advantages of a 401k and IRA? Well there is! It's called a Fixed Indexed Annuity (FIA).
An FIA is an insurance product where the Insurance Company assumes the risk. The annuity owner can invest as much as they want during the accumulation (growth) phase and the growth of the account is tax-deferred. Interest is credited every year based on a stock market index (such as the S&P 500) with the annuity owner's funds never actually being in the stock market. This means that if the market were to ever decline or "crash" the principal and the interest credited is protected. This creates an ideal environment for sustained growth through the life of the annuity. Once the accumulation phase has ended and it is time for "Annuitization" or distribution phase, you can choose several ways to distribute your retirement funds with one being a guaranteed income for life.
There are many things to consider when purchasing an annuity and it is certainly not right for every retirement investor, so make sure to speak to one of the Licensed Experts at The Legacy Council at (513) 442-2000 to help guide you through the process.