Golden Opportunities

Did the devastation to your portfolio due to the stock market storm cause you to swear off investments? (or maybe just leave you swearing?!) There are alternatives! Jim Lineweaver is here to tell us about an investment option that just might offer a safe harbor for your battered dollars. Jim is a financial planner with Lineweaver Financial Group.

Question: We talked recently about some investments that were alternatives to the stock market, including certificate of deposits, or CDs, as well as fixed annuities. But there's another type of annuity that we didn't touch on - a fixed annuity. Tell us about that.

Answer: Sure. With a fixed indexed annuity, the interest you earn is based on the changes in a stock market index, like the Dow Jones Industrial Average or the S&P 500.

Question: Wait a minute - so we're back to the stock market?

Answer: In a way, but you’re not investing in the stock market. 2. The Dow Jones and the S&P 500 are both measures of the stock market, but with a fixed indexed annuity you do not own stocks or mutual funds or any other direct investment in the stock market.

• Your money is invested in a fixed interest bearing account.
• If the index goes down, you do not need to worry about your account value dropping in value.
• And if the index goes up, the amount of interest you are credited with will be based on how much the index has appreciated and the type of crediting method linked to the index.

Question: How is all this measured?

Answer: One common measurement of a fixed indexed annuity interest crediting method is an annual point to point indexing method.
For example, they may look at the index on May 1st of this year and compare it to the index on May 1st of 2010. If the index is higher next year than it was this year the insurance company will credit you with interest up to a pre-set cap.
The caps can change annually, and may have limits as to how low the cap can go. If the cap is 7%, and the index goes up 10%, you will be credited interest of 7%. If the index goes up 3%, you will receive interest of 3%.
In many contracts these gains are locked in and then can’t be taken away. So, if in turn the market goes down you will not make anything that year but you will not lose anything either.

Question: Can you give us an example?

Answer: Sure. And this will show how the account value of a generic Fixed Indexed Annuity can increase – but never decrease in value.
Let’s say you have a $100,000 investment. This chart shows that hypothetical investment using an Annual Point to Point crediting option, with 50% participation. Annual interest credits for the Annuity are based upon assumed indexed-interest rates linked to the S&P 500’s actual performance and will never be below zero percent.
The Minimum Guaranteed Surrender Value is based on a minimum interest rate of 2.0% on 100% of premium.

Question: I can see that for a few years there, the annuity's value stayed the same - no money was made, but no money was lost either when the stock market took a big dive.

Answer: True. But you’ll see the Minimum Guaranteed Surrender Value did increase during this time. The S&P 500® Index value assumes an initial investment evenly allocated among the stocks comprising the index. a. Remember, the S&P 500® is an index measuring the performance of selected stocks; it is not an investment.
Whereas investments in stocks underlying the S&P 500® can gain or lose value, including principal, the Annuity is a fixed indexed annuity whose principal is guaranteed, which earns interest and is subject to minimum interest guarantees and credited interest caps.

Question: What if you want to take some money out of the annuity? Are you penalized?

Answer: Withdrawals will decrease account value and the dollar amount of future interest earned and may be subject to surrender charges.
Before you make any decision, make sure you read the fine print. Make sure you fully understand the restrictions before you invest. There can be substantial early withdrawal penalties which could cause you to lose some of your principal. You may have some ability to withdrawal funds from the account, but those will be limited, perhaps to 10%.

This investment option may be one you swear by! To find out more, give Jim a call! His number is next.