The stark difference between having money invested in the stock market vs. purchasing a fixed index annuity is, "RISK".

Wouldn't it be great if you could have upside potential on your money without the risk of losing principal.  Well you can in the form of a fixed index annuity.  With "fixed" being the operative word.

With companies no longer offering pension plans for their employees and shifting the risk on to the employee in the form of a 401(k).  Also, putting the burden on the employee to manage their retirement savings has crushed the fundamental basics of protecting your savings for retirement.  Who thought this was a good idea?  Well fortunately there is an alternative, in the form of a fixed index annuity.

The beauty of a fixed index annuity is the way the interest is credited to your premium.  The index annuity allows you to capture some of the gains of the market index without risking one penny to loss.  Your money is never invested in the stock market.  Generally speaking, the insurance company simply tracks the performance of the chosen index and after one year credits interest accordingly.  If the index is up you receive interest credits and if the index is flat or down the worst thing that happens is you receive zero interest credits.  You cannot lose money in a fixed index annuity.

Furthermore, as you can see in the above illustration, another important benefit is your gains are locked in.  So when the market goes down, those who were invested in stocks and mutual funds start at the bottom and are now playing catch up.  On the other hand, those who had a fixed index annuity start at the lower point, however, because they did not lose any principial, they are effectively capturing gains below the line.  A very powerful concept indeed.


Now let's compare the two retirement vehicles.

1) Competitive interest rate/return?

YES - Fixed Index Annuity
YES - Mutual Fund
YES - Stock

2) Free from market loss and price fluctuation?

YES - Fixed Index Annuity
NO - Mutual Fund
NO - Stock

3) Principal guaranteed or insured?

YES - Fixed Index Annuity
NO - Mutual Fund
NO - Stock

4) Penalty if "completely" surrendered early?

YES - Fixed Index Annuity (no penalty after surrender charge schedule)
NO - Mutual Fund (sell at market)
NO - Stock (sell at market)

5) Allows additional premiums/investments?

YES - Fixed Index Annuity
YES - Mutual Fund
YES - Stock

6) Guaranteed minimum rate of return?

YES - Fixed Index Annuity
NO - Mutual Fund
NO - Stock

7) Earnings free of current taxation?

YES - Fixed Index Annuity
NO - Mutual Fund
NO - Stock

8) Provisions for lifetime income?

YES - Fixed Index Annuity
NO - Mutual Fund
NO - Stock

9) Automatic avoidance of probate expense and delay?

YES - Fixed Index Annuity
NO - Mutual Fund
NO - Stock

10) Sales charge fees?

NO - Fixed Index Annuity
YES - Mutual Fund
YES - Stock

11) Exempt from legal process?

YES - Fixed Index Annuity
NO - Mutual Fund
NO - Stock

The choice is clear, you decide.