Posted by Affected by the uncertain Russian-Ukrainian war and the continuous impact of the Fed’s interest rate hike plan, the U.S. securities market has suffered heavy losses from January to May 2022, and the market value of the stock market has evaporated by more than $1 trillion.
The assets of many families have shrunk significantly in this round of market volatility.In the U.S. dollar wealth management market, everyone has turned on an obvious risk-averse mode and actively "seeks asset protection."
Fixed Income Index Annuity Insurance, due to its asset insurance properties and specific functions, shines in this volatile market environment of "endless decline", and the total quarterly account opening premiums increased by 18% month-on-month to $170 billion.
1. What is fixed income index annuity insurance?
Fixed Income Indexed Annuity Insurance Account, known as Fixed Indexed Annuities in English, or FIAs for short, is a type of wealth management account product issued by life insurance companies.Protects from falling markets, provides fixed incomeas the main feature.
2. What can a fixed income indexed annuity do for me?
Fixed-income index annuity insurance accounts provide policyholders with two core financial management functions:
2.1 My principal is protected from losses caused by market declines
During the first half of 2022, the U.S. securities market was hit hard, wiping out more than $7 trillion in market value in just a few months.
In the severe market decline, any investor's investment and financial accounts directly involved in the market, such as IRA retirement accounts, 401k, 403b, stocks, funds, options, and virtual currencies, may face substantial losses.
Fixed-income insurance wealth management accounts provided by life insurance companies,It can lock the loss state of "0", and protect the safety of funds in the violently volatile market conditions.Help policyholders avoid losses due to market declines.
More importantly, thanks to the protection of savings by insurance, every family can still have a calm and calm in the face of drastic changes in the market environment.
2.2 The capital appreciation part of my account is exempt from capital gains tax (Tax-Deferred), and there is no need to file tax returns every year
Similar to other retirement accounts in the United States, financial accounts such as insurance companies enjoy the tax advantages of Tax-Deferred.Specifically, it means,The assets in the insurance account, the part that grows every year, do not need to be declared annually and do not need to pay annual taxes.
Compared with our own financial transactions in our personal brokerage accounts, in the annual tax season, we need to make additional declarations and pay taxes on the annual dividend income and capital gains.This is another major feature of insurance account financing.
2. How does a fixed income indexed annuity insurance work?
2.1 Choose a product for several years
In the first step, the insured first needs to choose and open an insurance account with a lock-in period of "several years". The usual choices are 5-year, 7-year and 10-year lock-in periods.The example in the following figure:
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The "lock-up period" is similar to the concept of a bank's several-year fixed deposit.During the lock-in period, policyholders are required to pay a fee to make full withdrawals.Usually, some new insurance products,There will be an additional limit of annual free withdrawals without penalty.
After the lock-in period ends, the policyholder can choose to keep the funds in the insurance company's account or use it for other purposes at any time.
2.2 Choose the method of fixed income interest calculation
Since it is a fixed-income product, the policyholder, or investor, needs to choose a specific fixed-income interest calculation method.For fixed income indexed annuities insurance,Usually at an "annual fixed rate of return",or"One-year point-to-point"Choose between income and interest accrual methods.
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2.3 Select the corresponding index
How much the insurance account earns is based on a public market index.So, in the final step, we need to choose a public market index provided by an insurance company.
Our income depends on the rise and fall of the corresponding index.However, our premiums did not directly enter the market to buy the index. The insurance company pays us interest year by year according to the interest calculation method we choose and the rise and fall of the corresponding index, within the income range stated in the account contract.
(>>>Recommended reading:Popular Science Posts | What are the 4 common market indices in US dollar insurance products?）
Who is fixed income index annuity insurance suitable for?
- Families who may need to withdraw some money from the account from time to time to use if needed.
- Want to leave a fortune to your children or family
- In volatile market cycles, seek asset appreciation potential, tax incentives, and financial channels to avoid market losses. (End of full text)
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