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These are similar to a Pension, a.k.a. Single Premium Immediate Annuity (SPIA).
a. Income is based on life expectancy
b. Income is based on current interest rates
These are similar to a CD as there is a fixed amount of interest for a fixed number of years. a. The insurance company secure deposits with investment grade bonds.
b. $1 for $1 in Reserve; for every $1 secured in a bond the insurance company is required to maintain $1 in reserve backing the bond.
c. Reinsurance
d. A state guaranty fund is administered to protect policyholders in the event that an
insurance company defaults on benefit payments or becomes insolvent. www.nolhga.com
A Variable Annuity subjects principal to the variability of the stock market. When the stock market gains your principal gains, when the stock market crashes your principal crashes.
a. Your money is directly invested into Mutual Funds subjecting your principal to risk.
b. Fees average 4% per year whether the stock market is up, flat or down.
c. Guaranteed lifetime income = Annuitization; you lose control of your principal balance to the insurance company.
A Fixed-Index Annuity does not subject principal to the variability of the stock market. When the stock market gains your principal gains, when the stock market crashes your principal stays intact.
a. Market like gains without the risk of market like losses.
b. Income Rider Guarantees = 1% to 10%, Simple & Compounding %.
c. Fees average 1% per year whether the market is up, flat, or down.
d. Single or Joint, Guaranteed Lifetime Income without losing control of the principal.
e. "Terms = Small Print” are Index Crediting Strategies = Cap, Spread, or Participation.
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