Retirement planning is an essential part of growing older and thinking towards the future. However, when there are multiple options for savings, which do you choose? Fixed index annuities have become extremely popular within the past few years, and for good reason. Let’s take a look at FIAs and what benefits they have to offer you and your family.

What is a fixed index annuity?

To put it simply, the purpose of an annuity is to protect against the possibility of running out of money later in life. Fixed index annuities are tax-favored accumulation products issued by insurance companies. Similar to a 401(k), these are tied to the stock market. The major difference with an FIA is the insurance company bears the risk if the stock market declines. As with other index annuities, they are subject to rate floors and caps, meaning it will not rise or fall out of its set levels as the stock market fluctuates. With an FIA, you cannot lose any of your principal and many of them offer premium bonuses.

What are the benefits?

Fixed index annuities come with various benefits, which is why they’ve become so popular. For starters, they are tax-deferred, meaning you pay no income taxes until you withdraw money. Cool, right? Also, the Required Minimum Distribution that comes with IRAs and Roth IRAs is avoidable if you transfer to an FIA.

As we progress as a society, people are living longer and spending more on retirement, causing retirees to become concerned they’ll outlive their savings. Other than Social Security benefits, fixed index annuities are the only guaranteed paycheck that lasts until you pass away. FIAs are designed for a lifetime and ensure a steady stream of income that allows you to live comfortably. Also, if you pass away, your remaining cash value will be transferred to your designated beneficiaries.

Another important factor about FIAs is diversifying your retirement savings portfolio. When you are on a fixed income during retirement, a fixed index annuity will ensure a constant flow of predictable earnings. You can budget a comfortable lifestyle with no risk to your hard-earned cash.

Are there any drawbacks?

It is important to be mindful that fixed index annuities have a set contract limit, meaning you may have to wait several years before you can withdraw from your account or you can face a steep penalty. Some FIAs charge for early withdrawal if you wish to utilize your funds before your contract limit has passed. However, most FIAs allow owners to withdraw 10 percent of the cash value each year without facing surrender charges, allowing them to have access to the liquidity.

It is not recommended to purchase an FIA later in life. But for professionals who are 10 to 15 years from retirement, an FIA would be a reliable solution if you prefer to avoid the risks of stock market performance or want to diversify your existing portfolio.
If you’re curious about what a fixed index annuity can do for your future savings and if it’s the best decision for you, give Ray a call at 214-810-5881 or message him here!

3 options to save for unexpected medical costs

Medical expenses are the number one contributor to debt and bankruptcy in the U.S. In fact, 67 percent of people worry about how they can afford surprise medical bills over any other expense, despite having health insurance coverage. From a short trip in an ambulance to a long battle against cancer, patients are smacked with overwhelming bills that cause unnecessary stress when they should be focusing instead on getting healthy. Luckily, there are several options available for families to begin saving for medical bills and responsibly prepare for unexpected costs.

Start an emergency savings fund.

With a little adjustment to your lifestyle and monthly budget, you can efficiently grow a pot of savings to cover a rainy day. Budget your contributions the same way you budget for your bills, mortgage, retirement savings and other expenses. It doesn’t have to be 20 percent of your income; start with two or three percent and work your way up until you have enough money to cover at least six months of expenses. Making it a habit to save a set amount each month will deem a blessing when those bills start piling.

Consider investing in a Health Savings Account. 

If your employer offers the option to contribute to a Health Savings Account, you should participate in it. HSAs work similarly to retirement accounts and offer great tax advantages. Your contributions are tax-deductible and any interest the account gains is tax-free. When medical expenses arise, no matter your age, you can withdraw money from your HSA and never be taxed. 

Users can withdraw from HSAs at any time. Though if it’s for non-medical expenses, expect to pay a 20 percent penalty. After age 65, you can withdraw from an HSA for both medical and non-medical expenses and not pay any penalties or taxes.

Get extra coverage with a supplemental insurance plan.

Enhance your current health insurance policy with supplemental insurance. Aflac is the most commonly known provider of such products, but there are other providers like AARP and State Farm that offer beneficial options. Various policies assist with unplanned expenses that your current health insurance policy might not cover, including copays and costs for overnight hospital stays. Supplemental policies such as cancer insurance and critical illness insurance will help you prepare for the worst.

Don’t let the dread of hospital bills deter you from addressing your health care needs. We can work with you and your family to determine the best option for addressing unexpected medical costs. Contact us today!

Finance Your Retirement Just Like Your Home

When you decide to purchase a home, you search for the home of your dreams until you find it. Unless you have $100,000 to $200,000 sitting in an account, the next step involves securing the financing to purchase that dream home. In most situations, you provide a down payment, the bank loans you the rest, and you begin making payments which the bank expects for the next 15 to 30 years depending on the terms of your loan.

Did You Know?