F&G’s payout rate is a whopping 12.47% – more than the average annual gains of the S&P 500, including dividend reinvestment. Remember that this income payout is guaranteed, so payments continue until death, regardless of whether the annuity’s principal is exhausted.
For Income-Oriented Investors, Select FIAs Offer Substantial Guaranteed Payouts
Each year, fixed income annuities (FIAs) become increasingly popular, and one huge reason is that they provide exposure to stock market indices, including the popular and widely known S&P 500, simultaneously guaranteeing no loss of principal.
The price for this is that owners receive only about half of the market’s gains in a good year. Most are happy with the tradeoff as the aging bull market continues to climb, becoming more vulnerable to sell-offs, such as the one in mid-May. While you don’t lose money in an annual market decline, you don’t make anything either. FIA income riders with good index participation rates, meanwhile, are usually modest and sometimes extremely modest.
What many people do not know, however, is that FIA income riders can be very generous. They are usually even more generous if you’re willing to buy a FIA that offers a strong lifetime income rider at the expense of a reasonably good index participation rate.
It boils down to this: You can use a small handful of FIAs as a super-charged, plain vanilla fixed annuity – and become richly rewarded with no additional risk whatsoever.
A case in point is the Fidelity & Guaranty Safe Income Plus. Like all FIAs that highlight their lifetime guaranteed income riders, it has a so-called roll-up rate: an annual credit allocated to an investor’s benefit base if he or she is willing to wait before taking payouts. That is 7.5% a year, compounded, up to 10 years, roughly average for a FIA but more than many traditional fixed annuities pay.
More important by far is that F&G’s payout rate is a whopping 12.47% – more than the average annual gains of the S&P 500, including dividend reinvestment. Remember that this income payout is guaranteed. So payments continue until death, regardless of whether the annuity’s principal is exhausted.
What does this mean for a prospective annuity buyer today? If you are somewhat skittish about the direction of the stock market, this product may well be your cup of tea. Its A.M. Best rating is A-, recently upgraded from B++.
“When it comes to income FIAs, this product is killing it,” says one annuity broker familiar with this product. “It offers a much better payout rate, a better rollup rate and a slightly lower income rider fee (1.05%).”
The minimum investment in this product is $10,000.
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