Protect retirement savings with FIA's Annual Reset.

Annuities are excellent long term products to save for retirement or just to grow your savings. They offer many benefits, such us protection of principal and credited interest, possibility of income stream you can not outlive, or tax deferral. Different annuities have different ways to earn interest. For example fixed index annuities (FIAs) offer interest credit based on changes in a market index (S&P 500, Nasdaq-100, just to name a few), furthermore they offer annual reset feature, which is very often overlooked by potential clients and advisors. FIA with annual reset will perform much better than those annuities or other products without this feature. Simply put, annual reset protects your principal and interest when market is heading down. Your FIA won't suffer losses in value due to market downturns. This is very important a specially when you are retired or close to retirement, because there is no time to makeup losses when you need to start your income.

Last decade was an example of turmoil which wiped-out significant portion of retirement savings. If you were lucky, you probably have same what you have started with in 2001. Many retirees found themselves in difficult situation with limited income base, and worry of outliving their resources in golden age. Good news is, that you still can secure your income and even possibly increase it each and every year (get connected, and find out how). With unstable economy, uncertain future of medicare and social security it is crucial to protect retirement savings, and at the same time position it for possibility of healthy gains. This is where annual reset plays major role.

Let's take a look on hypothetical example. Fixed indexed annuity (FIA) with annual reset, initial deposit of $100,000 was purchased (please see chart below representing last decade 2001-2011). Current FIA's value marked  (yellow line). Market index S&P 500 marked (red line) representing actual index values throughout the decade. S&P 500 index is used as a benchmark to determinate each contract year's interest. Please note the values of of the index at the beginning and end of each year. In the first three years the S&P 500 was down and your savings allocated on the market plunge about 40% in the lowest point. It took another 3.5 years just to regain losses and get to initial $100,000. At the same three first years FIA's annual reset protected your savings. It didn't earned interest, it also didn't lose value. Your retirement income base was protected in case that was a time to retired. In the next five years S&P 500 values increased and FIA was credited with interest. And again in year ninth S&P 500 was down losing all gains and shrinking principal, while FIA kept its value. Annual reset allows for growth when market index is up, and protects your principal and interest when index is down.

Click on chart to enlarge


Using historical data for S&P 500 1/1/2001-1/1/2011 and assuming hypothetical FIA with annual point to point crediting method and 4% annual cap.  

In summary, S&P 500 does not have to make up previous losses in order for FIA to earn interest. Each contract year, S&P 500 ending value becomes next years FIA's starting value. 

with questions or concerns.