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Indexed Annuities | What are they? | Lindsey’s Four Key’s to Investing in Indexed Annuity…

Indexed Annuities | What are they? | Lindsey’s Four Key’s to Investing in Indexed Annuity…

By on Sep 18, 2013 in From Find the Capital, Personal Investing, Videos | 0 comments


Article by, Brent Virkus of Find the Capital

Virkus Picture HalfIndexed Annuities have become very popular as of late. Why is this? Well to help Find the Capital's follows better understand this type of investment, Lisa Virkus Founder and CEO of Find the Capital conducted a short interview with industry leading Financial Advisor, Cleat Lindsey about Indexed Annuities and his Four Keys to Investing in them.

In summary Indexed Annuities have become popular due the people still being leery about the stock market and the fact the banks simply are not paying interest of any significance. Basically an Indexed Annuity protects the investor from downside risk and allows them to "participate" in the potential upside of the stock market.

Lindsey's Four Keys to Investing in Indexed Annuities are as follows:


First...Understand the CAP Rate or the Floor

The floor refers to the minimum guaranteed amount credited to the account. At the time of this writing (see Update date at the bottom of this page), this rate is almost always between 0% - 2%. The cap rate is the annual maximum percentage increase allowed. For example, if the chosen market index increases 35%, and the contract has a 10% cap, the increase will be limited to 10%. Some contracts do not have a cap rate (these tend to have a lower participation rate, such as 30% to 50% compared with 75% to 100% for a plan with a cap rate). The cap varies depending on the length of your term -- fixed-indexed annuities with longer commitment periods (surrender periods) tend to have a higher cap rate, whereas annuities with shorter surrenders periods tend to have a lower cap rate. NOTE: The cap may reset annually and is subject to change at each renewal.


Second...Be aware of the Bailout Rate

An Indexed Annuity bailout provision is a clause in the contract of your annuity that allows you to withdraw your money without any penalties based on predetermined conditions. Some annuity contracts include a medical bailout provision for nursing home expenses or if you become terminally ill. Once your annuity expires, on the maturity date you have the option to either renew or surrender the annuity. If you surrender at this time, you do not pay charges. Choosing to renew may reinstate all charges. Some annuities have a charge so that your beneficiaries will not receive the full amount. Should the current interest rate drop, there may not be a surrender charge; this is referred to as a bailout option. This interest rate drop bailout feature becomes a waiver of penalties.


Third...Know your Surrender Charge

The surrender charge on an Indexed Annuity is a charge levied against an investor for the early withdrawal of funds from an insurance or annuity contract, or for the cancellation of the agreement. Surrender fees act as an economic incentive for investors to maintain their contract, and they allow the insurance company to have reasonable expectations for the frequency of early withdrawals.


Fourth...What is the Worst Case Scenerio

If the stock market does not go up, what is the worst case return the Indexed Annuity is going to pay you?


About Cleat Lindsey

Cleat Lindsey is an industry leading Financial Consultant and Partner with Scripter and Associates. From Cleat...

"I chose to be an "Independent" Financial Consultant (clearing through LPL Financial*) rather than joining one of the big Wire House firms. The primary reason was that I wanted my clients to have access to a wide variety of investment strategies, where I could specialize in providing "Alternative Investments" and "Asset Preservation Strategies", "Retirement Income Planning", to go along with traditional investments. Moreover, I did not want my clients to feel pressured into using proprietary investments, when there may be better alternatives."

To learn more about Cleat Lindsey, visit

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