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Should You Protect Your Money or Try to Grow It?

With a Fixed Indexed Annuity, You Can Do Both.

 

Whether you’re already retired, or a few years away, like most people you want to protect your hard-earned money and see it grow. But with today’s lower interest rates, safer investment products like CDs, money markets and bonds may not provide the growth potential you need for retirement planning. You can turn to the stock market, but that means taking on risk, maybe more than you’re comfortable with.

What if you could have both protection and the opportunity to grow your money?

You can, with a fixed indexed annuity.

Below are answers to some of the most frequently asked questions about this popular product.

 

What is a fixed indexed annuity?

A fixed indexed annuity (FIA) is a tax-deferred financial tool designed for the long term offered by insurance companies. Your account value is protected against market loss, but has the opportunity to grow by earning interest based on the performance of an index or indices that you choose. You also have the ability to allocate some or all of your money to a fixed rate strategy that earns a guaranteed interest rate. When you feel the time is right to start receiving income payments, you can annuitize your contract for a specific period of time or for the life of the annuitant.

To help balance the value of the downside protection, the insurance company imposes an upper limit, or “cap,” on the amount of interest you can earn in a given period. But again, it’s important to remember, you cannot lose money based on market declines. It’s that peace of mind that makes fixed indexed annuities so attractive.


How does a fixed indexed annuity work?

Fixed indexed annuities typically offer you a choice of strategies for potentially growing your money: a fixed interest rate option and index-based options.

The fixed interest rate strategy earns a guaranteed interest rate for a period of one year. The interest rate is declared at the time you purchase your contract and renews annually on your contract anniversary at the new current rate.

With index-based strategies, your money has the potential to grow based on the performance of one or more market indices, such as the S&P 500. The interest rate you can earn is usually calculated over a predefined time period and can vary based on the features of the annuity. As noted earlier, the interest rate you can earn is subject to an upper limit called a “cap” that is initially set at the time you purchase your contract and which resets after each term. For example, if the market index goes up 7% and the contract has a 5% cap, the growth is limited to 5%.

Your principal and earnings are protected by the safety of a "floor." The floor prevents your annuity from losing value even if the index declines during your term. Your principal and any interest credited are protected. You cannot lose money based on market performance.


Would I have the flexibility to access my money if I need it?

Fixed indexed annuities are designed for long-term financial planning purposes. However, if you need to withdraw money, you can. Keep in mind, however, that depending on how much you take out and when, you may incur penalties and/or fees. These can vary by product and state. Ask your financial professional for details.


How will a fixed indexed annuity affect my year-end taxes?

One of the benefits of any annuity is tax deferral. You pay no taxes on any interest you earn until you make a withdrawal, so more of your money stays invested, any interest credited can continue to compound, and your assets may accumulate faster than with taxable investments like CDs.


Is there a death benefit with a fixed indexed annuity?

Yes. Fixed indexed annuities offer a built-in death benefit for your loved ones that enable you to leave a legacy if you pass away. Depending on the product, there are a variety of options for beneficiaries which may include payment of a lump sum, regular income payments, deferral of receiving the death benefit, or taking over ownership of the annuity contract. Your financial advisor can provide you with product-specific information.

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Why choose a fixed indexed annuity?

A fixed indexed annuity can be a smart choice as part of your overall financial strategy for several reasons:

  • You can benefit from protection, while still maintaining the opportunity for growth
  • You can earn interest based on the performance of your selected indices without the risk of actually being invested in the stock market
  • Your money is protected from any market downturns (assuming you abide by the terms of the contract)
  • Your money can grow faster with the power of tax deferral
  • You have access to your money at any time during your contract term – penalties and/or fees may apply depending on when and how much

Your financial professional can provide you with in-depth information about the various fixed indexed annuity options available and help you determine if one is right for you.

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footnote

Annuity contracts contain exclusions, limitations, reductions of benefits and terms for keeping them in force. Your licensed financial professional can provide you with complete details.

Your needs and the suitability of annuity products and benefits should be carefully considered before investing.

Withdrawals and distributions of taxable amounts are subject to ordinary income tax and, if made prior to age 59½, may be subject to an additional 10% federal income tax penalty, sometimes referred to as an additional income tax. Withdrawals reduce the account value and death benefits. Any withdrawals maybe subject to the  surrender charges and a Market Value Adjustment (MVA).

Market Value Adjustment (MVA)  - A positive or negative adjustment that applies during the surrender charge period to any withdrawals that exceed the Free Withdrawal Amount.

All references to guarantees are backed by the claims-paying ability of the issuing company.

It is not possible to invest directly in an index.

CDs are FDIC-insured up to $250,000 per financial institution, and there may be a penalty for early withdrawal. Fixed indexed annuities are not FDIC-insured, and have limitations and surrender charges.

All products and/or product options may not be available in all states or with all broker/dealers.

S&P 500® Index is a market capitalization-weighted index of the 500 widely held stocks often used as a proxy for the stock market. S&P chooses the member companies for the 500 based on market size, liquidity and industry group representation.

©2018  Prudential Financial, Inc. and its related entities. Prudential Annuities, Prudential, the Prudential logo, the Rock symbol, and Bring Your Challenges are service marks of Prudential Financial, Inc. and its related entities, registered in many jurisdictions worldwide.

For Compliance Use Only: 1000624-00001-00

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