Are Your Savings Accounts Hurting Your Retirement?
Do you have a significant amount of money in conservative savings accounts? Conservative savers often want to avoid volatility in the market, so they may be willing to accept low interest rate offerings. However, with today’s low interest rate environment, they may be missing out on potential growth opportunities in the market.
Saving money is one of the best things you can do for yourself and your family. Insuring against a catastrophe or major issue is a critical part of a healthy financial picture. However, you may want to have a little of both – protection of principal and potential for growth.
A fixed indexed annuity (FIA) is one such option. A FIA is an insurance contract with a combination of accounts available; one fixed account with a guaranteed minimum interest rate and an indexed account where interest is linked to the performance of an external index (like the S&P 500®.) The benefits of these products are that you’re protected against loss should the index have a negative return and you can potentially realize some growth when the index is having strong performance. The interest on the indexed account is capped at a maximum percentage. The maximum percentage or cap may vary based on the surrender charge period and can change annually. The interest credited to the indexed account will not exceed the maximum cap, however you will be protected against loss should the index perform poorly. In years where the index performance is negative, no interest will be credited.
In exchange for this protection, you sacrifice some liquidity. When you purchase a FIA, you choose a surrender charge period between five and nine years. During that time, you will pay a surrender charge if you decide to withdraw your money. A FIA may work best if you have a portion of retirement savings you know you won’t need for several years but still want some potential growth.
If you’re someone with lots of assets in conservative savings accounts, exploring options like fixed indexed annuities might help you realize some market growth while maintaining asset protection.
This article was prepared by Thrivent Financial for use by local area representative Merrillee Bradshaw. She has offices at 15117 Main St. #206 in Mill Creek and can also be reached at 206.949.2204.
