How Your Savings Can Grow With an Indexed Annuity

Indexed annuities give you multiple interest crediting options to grow the cash value of your annuity.

You can choose a fixed rate or opt for getting interest credited based on the growth of a market index of your choice — without directly participating in the market.

Key things to know about the upside potential and downside protection offered by an indexed annuity:

• The potential growth of the cash value of an indexed annuity is based on the performance of a market index like the S&P 5001 or on a fixed interest rate.

• You typically have a choice of multiple crediting strategies.

• Indexed annuities aren't directly invested in a market index.

• Caps and participation rates are important factors in determining how much interest is credited when the market goes up.

• Indexed annuities offer protection and a zero percent floor [2] when the market goes down.

Why is the upside potential of an indexed annuity?

The potential growth of an indexed annuity is based on the performance of a market index in a given period (usually over a one- or two-year period).

Indexed annuities typically offer a choice of interest crediting strategies based on different market indexes.

Which index strategy should I choose?

That is up to you! No one can predict how the market will perform — and just because a strategy performed a certain way in the past, doesn’t mean it will perform that way in the future. You can also pick more than one strategy. However, remember that diversification does not assure a better return.

What if I am worried about getting an indexed annuity just before a downturn?

With the point-to-point method, you have the option to spread your premiums over 12 months, using Dollar Cost Averaging. If you choose to allocate all of your premium to a DCA account, 1/12th of your premium is moved into the index strategy of your choice each month, receiving that month’s rate for a 1-year or 2-year period.

You can also choose to allocate only a portion of your premium to a DCA account (with a minimum of $5,000), and every month, you have the option to move all remaining premium into an index strategy of your choice.

Spreading out your premium over a 12-month period helps capitalize on more potential interest rate crediting dates and reduces risk associated with one annual crediting anniversary. However, this does not guarantee better outcomes.

Until allocated into a monthly crediting strategy, premiums will earn interest in a fixed interest crediting account.

Are there other interest crediting methods?

Yes, you can opt for a monthly sum cap method.

This method is similar to the point-to-point method, but interest crediting is based on the monthly index change, with a cap for that month. The 12 monthly changes, including negative percentages, are totaled at the end of every year to determine the interest credit.

Can I change strategies?

Yes, you can change index strategies at any time. Your new strategies will take effect at the beginning of the next crediting period.