An introduction to structured annuities, including key features, benefits, and risks.
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Exploring Structured Annuities: [ Ссылка ]
Annuity Beach Reads, Structured Annuities: [ Ссылка ]
Getting Started with Annuities: [ Ссылка ]
TRANSCRIPT:
Are you looking to round out your portfolio with a long-term investment, that provides competitive earning potential, tax-deferred?
Or are you seeking an investment with moderate risk exposure as you plan for retirement?
If you are, a structured annuity may be able to meet your investment needs.
Structured annuities are designed to give you the opportunity to participate in market growth, while also mitigating some exposure to market loss.
Unlike traditional fixed indexed annuities, which are fully protected against loss–a structured annuity gives you the possibility to earn higher returns, in exchange for taking on some downside risk.
One of the key features of a structured annuity is how it can grow your premium using an Index-Based Strategy.
With an Index-Based Strategy, the premium you invest earns interest based on the performance of the underliers you select–which could be an index (like the S&P 500), an ETF (like the iShares MSCI EAFE)or some combination of both.
Your premium is never directly invested in the index or ETF of your chosen underlier. Instead, the performance of that underlier is used to help determine how much interest, positive or negative, you earn.
The amount of that interest is calculated using the crediting strategy you select. A crediting strategy defines how changes in the performance of your underlier are measured.
Each crediting strategy includes an upside feature that calculates the interest you earn when your underlier goes up for a given term. This same feature also puts a limit on your potential gains.
The three most common upside features are: Cap, Spread, and Participation Rate.
Your crediting strategy also includes a downside protection feature used to calculate–and place a limit on–any negative interest deducted when your underlier performance goes down for a given term.
The two most common downside protection features are a Hard Buffer and Floor. You can learn more about each of these downside and upside features in our related videos.
When selecting a crediting strategy for your structured annuity, the level of potential upside you choose directly correlates to the level of protection available on the downside.
Typically, a crediting strategy with more downside protection offers less potential upside. Conversely, a crediting strategy with less downside protection usually offers greater potential upside.
For this reason, it’s important to consider your unique level of risk tolerance. Make sure to read and understand the terms of each crediting strategy before making your selection.
Another important feature of each crediting strategy is the crediting period or term, which is the duration of time the performance of your underlier is used to calculate your gains or losses. Typically, terms range from one to six years.
Over the life of your structured annuity, as each crediting term expires, any interest earned or lost for that period is credited or deducted from your account value. You then have the ability to reallocate to any available crediting strategy, or combination of strategies, for a new term.
This "reallocation" feature adds flexibility, allowing you to redesign your structured annuity–over time–to meet any changing financial objectives.
As an added benefit, structured annuities provide the opportunity for your gains to grow tax-deferred. So–until your earnings are distributed–you’ll be able to earn interest on money you’d have otherwise paid in taxes.
It’s important to note that there are defined limitations that can restrict earning potential, as well as key risks you should be aware of.
Your premiums are subject to a risk of loss, which could be significant.
Structured annuities are designed as long-term investments, withdrawals may incur fees or tax penalties and may be subject to negative adjustments, which can be substantial.
From term to term, available underliers, renewal rates for upside features, and term lengths are all subject to change, at the insurance company’s discretion.
In our corresponding videos, you can learn more about these factors, as well as other key features, penalties, and optional benefits.
With the opportunity to participate in market growth while reducing exposure to market loss; a structured annuity may be able to bring balance to your portfolio, helping you reach your retirement goals.
