Broker Check

What are Taxed Deferred Indexed Annuities?

  • Investment “A” - unlimited potential to increase and unlimited potential to decrease (Stocks, Bonds, Mutual Funds, Variable Annuities)
  • Investment “B” - guaranteed to increase based on current interest rates
    (CD’s, Money Markets, Savings Accounts, Fixed Interest Annuities)
  • Investment “C” – capped potential to increase and can never decrease
    (Equity Indexed Annuities - When the market is UP your annuity will realize annual index gains. When the market is DOWN your gains are locked in.)


  • Best suited for long-term investors who need guaranteed retirement income and/or tax-deferred accumulation.
  • Safety of Principal - The total accumulation value is contractually guaranteed not to decrease due to stock market declines.
  • Tax Deferral - Annuity contracts have special tax status. Policy values are tax-deferred until the annuitant decides to make a withdrawal or start the income stream. Note: There may be a 10% IRS penalty for any withdrawals made prior to age 59 ½. However, under certain conditions this penalty can be avoided.
  • Deposit Bonuses - Some insurance companies offer bonuses based on the amount of the deposits.
  • Capture the Gains of the Stock Market - Indexed annuity yields are based on the gains of one or more of the stock market indexes, such as the: S&P 500,The Dow Jones, NASDAQ 100 or the Russell 2000. Many annuities also offer an optional guaranteed fixed interest rate option.
  • Annual Reset Option - Indexed gains are locked-in each year. Premium deposits, bonuses, and gains can never decrease due to stock market downturns.
  • No Management or Brokerage fees - There is a trade-off for this feature. Many insurance companies limit the upside growth potential with capped returns, participation rates, and/or margins. The representative is paid an up-front sales commission directly from the insurance company account − not the annuity owners pocket.
  • Guaranteed Income Riders - In exchange for an annual premium, this rider offers a guaranteed income growth account. When the annuitant is ready to turn on the income stream, the income is guaranteed for their lifetime - regardless of stock market performance. It is important to note that this guaranteed is not on the cash value of the account, and is only effective should the income stream be turned on. Also, any guarantees are provided byt he underlying insurance company, and not any government agency.
  • Penalty-Free Withdrawals and Surrender Charges – Insurance companies must have control of annuity deposits so they can fulfill the contract guarantees. As a result, annuity contracts come with a penalty schedule that will decease annually - typically over ten years. This means that this type of investment is not readily liquid. However, most annuities do allow for an annual 10% penalty free withdrawal of the accumulation value. These penalties do not apply in the event of the annuitant’s death.
  • No Probate - In the event of death the beneficiaries will receive the annuity proceeds free of probate related issues. (Note: The beneficiaries of non-qualified annuity gains may be subject to income tax.)

Company Quality

Annuity contract guarantees are subject to the claims-paying ability of the underlying insurance company. As a result, our firm recommends annuities from insurance companies that meet the following three requirements.

  • At least 100 years old
  • An “A” rating from the rating services
  • Adequate cash reserves as determined by the department of insurance

Give us a call to help you determine whether an annual reset indexed annuity strategy might be right for your retirement plan.

Equity indexed annuities are contractually guaranteed retirement contracts that eliminate the downside risk of the stock market in exchange for a percentage of the upside market gains. Depending on the “cap” or “spread” (the maximum amount of interest your contract allows); the insurance company will determine how much of the upside potential in which you can participate. The reason you can’t lose your principal or your accumulated interest is because your money is actually not directly invested in securities. Instead, the account is linked to one of the stock market indexes, such as the S&P 500®. Since your money is not directly invested in the market, you will not experience a loss of your account value due to market downturns. One of the advantages of the equity indexed annuity strategy is that the downside market risk is eliminated, so you won’t need to be as concerned about maxing out your returns in order to offset your investment losses.*

Have a Question?

Thank you!