An Annuity With No Risks May Not Be the Best Option for You, After All

Interested in a fixed indexed annuity? Then you should consider the downsides as well as the upsides without being lured in with the promise of never having a loss in the market.

To break it down, consider the cap rate first. This is the maximum rate of interest the annuity can earn during the index term. If the annuity stipulated that the limit is 6% for an annual index term and the index performance does not exceed that cap, you’ll get the full refund.

Unless, of course, there’s also a participation rate that determines what percentage of the increase in the underlying market index will be used to calculate the index-linked interest credits. Meanwhile, a spread rate or margin is the percentage that is deducted from the change in the underlying index value to determine the net amount of Intex-linked interest credited to the annuity.