If you’ve ever wondered what an Indexed Annuity is, how it works, or why the heck are so many people talking about it… then this article is for you.

We’ll be going over:

1 – The mechanics of the Indexed Annuity
2 – How it compares against the S&P 500 over the last 20 years… from the year 2000 to present
3 – How it compares against other retirement accounts like 401k’s, IRA’s, 403b’s, 457’s and how it solves one of the biggest problems that comes with these account types.
4 – A couple of real life calculators that you can use to play around with the numbers

Alright, let’s get into it.

With your host, Arman Vakili: 

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To Get a Free Consultation to see if an Indexed Annuity is the right strategy for your wealth accumulation, pleas visit: www.armanvakili.com/freebies and request a Free Financial Consultation with one of our Licensed consultants.

If you’re being forced by the IRS to make your Required Minimum Distributions, then please visit: www.armanvakili.com/freebies and request a Free Financial Consultation with one of our Licensed Consultants.

If you’re open to new opportunities, or are looking to create wealth through building your own financial services business, please visit: www.armanvakili.com/freebies and request a free Business Planning session with one of our business coaches.

Video Chapters:

00:00 Intro
01:16 What Is An Indexed Annuity?
01:55 The 0% Guarantee
03:08 The Performance Cap
04:54 The Lifetime Income Rider
05:25 Required Minimum Distributions (RMDs)
07:09 Solving For RMDs
08:53 Planning For the Estate
11:16 The 1st Calculator: S&P 500 Versus Indexed Annuity
18:42 The 2nd Calculator: RMD’s Versus Income Rider
27:27 How to Get the Calculators
27:53 Get a Free RMD Consultation
28:09 Business Opportunity

First things first… 

What Is An Indexed Annuity and How Does It Work?

An Indexed Annuity is a retirement contract that you purchase with a life insurance company. 

You can make this purchase with cash out of your bank account, or with a rollover from another retirement account. 

Indexed Annuities have 2 phases: 

1. The Accumulation Phase
2. The Distribution Phase

During the Accumulation Phase, the Indexed Annuity offers some key benefits:

1 – A Contractual Guarantee that your Account Value will never perform below where it started from.

The worst case scenario, you’ll receive a 0% return in the Bear Markets. Sure, you don’t make any money, but you’re not losing any money, either. This is very important. 

2 – The option to Participate in the returns of a variety of markets.

You can choose from the S&P 500, the Barclay’s or any of the other major indices. However, you won’t be receiving the full returns of that market. In exchange for getting the 0% protection, the Life Insurance company will use your money to make money, and that typically comes in the form of a spread that they take from the gains.

One of the Calculators that I’ll be sharing with you today will show you exactly how powerful this concept is. You’ll see how the Account Value changes if it was invested directly into the stock market, versus if it was invested in an Indexed Annuity that reflects upon the market’s performance with a 0% guarantee. 

During the Distribution or Withdrawal phase, the Indexed Annuity Offers:

3 – The Lifetime Income Rider – This is HUGE.

Annuities in general offer something called a Lifetime Income, or Income For Life option. And this is just like it sounds. Once you turn it on, the life insurance company will begin paying you monthly income payments that will never stop. No matter what happens with the market, no matter if the original Account Value runs out… the income payments will never stop.

This is also very powerful for people who are being forced by the IRS to take Required Minimum Distributions (RMD’s).

In plans like 401k’s, Traditional IRA’s, 403b’s, 457’s and the like, there is a rule that enforces the account holder to start taking withdrawals from their retirement account on or before the age of 72. 

If the account holder does NOT start their distributions, the IRS will take 50% of the account value in taxes. This is done because the IRS wants their cut… they’ve given tax advantages to the account holder in the form of Income Tax deductions and tax deferred growth, and now they want their share. 

There is another – much more serious problem with the RMD’s. 

RMD’s are direct withdrawals from the cash in the account, which means eventually they’ll run out. 

The Lifetime Income Rider solves for this. Instead of direct withdrawals from their account, the Life Insurance company will give the account holder a fixed interest payment on their Account Value. This fixed interest payment is always above the RMD amount, thus it satisfies the IRS and they never take the 50% penalty. 

But more importantly, the Lifetime Income payment never runs out. In many cases, the monthly income can even be passed down to the beneficiaries. 

We’ll see exactly what kind of a difference this makes when we review our second calculator today. 

4 – A Death Benefit that is protected from Estate Taxes, Probate and feuds among the Heirs. 

If the owner of a 401k passes away and they never established a Trust, then the IRS can hold their 401k funds in Probate for as long as they want. In many cases, the beneficiaries of the account holder never receive the money. 

Furthermore, if the funds ever do make it out of Probate, the IRS will take a 50% tax from the funds as Estate Taxes. 

This applies to IRA’s, 457’s, 403b’s, Mutual Funds, and quite literally any other investment strategy that is NOT a Life Insurance Retirement Plan (LIRP).

When the owner of a 401k rolls their funds over into an Indexed Annuity, they get:

• Protection from market loss in the form of a 0% guarantee. 
• Participation in the market gains. 
• A Lifetime Income Rider that will make sure they never run out of money. 
• Estate protection from Probate and Estate Taxes.