Serot Group

Our next product spotlight focuses on indexed annuities. This is often times the best product available for those who want market upside with little or no downside or in order to supplement/produce retirement income.

Annuities are often the answer as many approach retirement or find themselves with a need for cash growth/income without the risk of the traditional stock market. Indexed annuities are the best of both worlds. As with any annuity, cash can come as a lump sum payment, a series of payments or be rolled over from retirement accounts without penalty.

What makes indexed annuities different from others?

The primary reason anyone would want an indexed annuity is the ties to the stock market, typically the S&P 500, to get better returns than you might otherwise. The most common method to determine your interest rate is via a "cap" rate. As mentioned before, there is often no risk to your account value in the event of negative market returns. The way this can be promised is by limiting your upside as well.

~"Cap" Method~
This method of determining interest rate is often done on a yearly basis. As most products are tied to the S&P 500, this method utilizes a cap to determine your gains. At present, you can find a cap around 4.5-5% depending on product. This means that gains track the stock market to a "cap" of lets say 5%.

ex. $100,000 in hypothetical annuity.
Market decreases 15% over the year:
due to our protection from loss we would change our value 0%. At the end of year we would still have $100,000.

Now, if the market increases 10% over the year we would increase the value 5% to $105,000 as our gains are capped at 5%.

This is a great way to find decent interest rates with little downside. It is also a great way to play the market with a lot less risk.