Buying indexed annuities and stock market investing – you may be wondering if they are similar financial strategies. Especially during a bear market, you might be unwilling to purchase a product that aligns itself closely with a market index (a subset of the stock market). However, the truth is that indexed annuities harness a percentage of the potential large returns of the market indexes, but also guarantee premium deposits (principal) and credited interest. Index annuities offer the conservative, safe backing of some of the top insurance companies in the country, but also allow you to participate in bull market cycles. This hybrid product is perfect for those savers in retirement or near retirement looking to maximize returns, all with no risk to their principal.

Many people consider indexed annuities and stock market investing to be one and the same. The fact is, indexed annuities have much more in common with stable, predictable fixed annuities than stocks, bonds and mutual funds. Index annuities are insurance products - products that, instead of yielding returns based on an interest rate set by the insurance company, are credited with interest earnings based on the performance of a particular market index, frequently the S&P 500.

Your money is never at risk, because it is never invested directly in the stock market. Instead, an index’s gain is used as a barometer to determine the amount of interest earnings the issuing insurance company is obligated to credit to your account. These interest earnings are then credited to your account, depending on the index annuity’s maximum cap. There are a few different ways that this gain is calculated; however, a yearly snapshot of index performance is the most common indexing method for indexed annuities.

An index annuity is a smart decision for those who are thinking about retiring. Your principal and interest are protected, like a savings account or CD. But you will typically earn higher yields than those conservative accounts.

Considering adding indexed annuities to your retirement portfolio? If so, contact AnnuityLibrary.com online or call the Annuity Specialists at 1-800-998-4056.