One of the most common questions (and points of confusion) about fixed indexed annuities is allocations.
Allocations are crediting strategies that determine how interest will be credited to your indexed annuity over a given time period (also called a 'reset period').
Different indexed annuities have different allocation options.
You will often hear the terms: 'Annual Point to Point', 'Monthly Point to Point' 'Monthly Averaging', 'Spread', 'Participation Rate', 'Fixed', etc.
So how do you know which is the best for your personal and unique growth strategies? The problem is you don't and there are three main reasons.
First, two identical allocation strategies can produce two different results, depending on the index values on the beginning and ending days of the reset period.
Second, some allocation strategies work better in certain market situations, but not others.
Since we don't know what the future market volatility will bring it is hard to (essentially) guess which allocation might work best over a given reset period.
And third, most allocation strategies are meant to limit the insurer's out of pocket risk, rather than provide you a 'market-like' return.
That is why you will see caps on 95%+ of all allocation strategies.
Despite all of this, allocation selections are important.
The right allocations can mean the difference between making money during an allocation period or earning a ZERO.
They can also determine your overall return from the indexed annuity or deferred annuity over the surrender term.
Insurance agents and advisors are generally not supposed to give detailed investment advice as to which allocations will make you more money or are better for you.
This is because doing so would (on the underlying market index) might be considered investment advice which would require a securities license.
So (like most of our clients) what do you do if you don't know enough to make the decisions yourself? The Fixed Indexed Annuity Allocations Comparison Calculator is designed to give you a way to compare how common fixed indexed annuity allocations would compare and contrast with each other given random and hypothetical market data.
Although the calculator does not contain every single allocation method offered today, the allocation strategies can be compares.
The calculator will not guarantee you any particular fixed indexed annuity with similar allocations will return X amount in Y circumstance.
It will give you an idea of how the allocation options work, and what they would return in a purely hypothetical (non real world) situation.
Once you understand how the allocation strategies correlate with each other, you can better prepared to pick your allocations yourself.
And you can put yourself in the drivers seat rather than leaving these critical decisions to your insurance agent or advisor.
After all, his or her recommendation is likely a guess anyways.
Allocations are crediting strategies that determine how interest will be credited to your indexed annuity over a given time period (also called a 'reset period').
Different indexed annuities have different allocation options.
You will often hear the terms: 'Annual Point to Point', 'Monthly Point to Point' 'Monthly Averaging', 'Spread', 'Participation Rate', 'Fixed', etc.
So how do you know which is the best for your personal and unique growth strategies? The problem is you don't and there are three main reasons.
First, two identical allocation strategies can produce two different results, depending on the index values on the beginning and ending days of the reset period.
Second, some allocation strategies work better in certain market situations, but not others.
Since we don't know what the future market volatility will bring it is hard to (essentially) guess which allocation might work best over a given reset period.
And third, most allocation strategies are meant to limit the insurer's out of pocket risk, rather than provide you a 'market-like' return.
That is why you will see caps on 95%+ of all allocation strategies.
Despite all of this, allocation selections are important.
The right allocations can mean the difference between making money during an allocation period or earning a ZERO.
They can also determine your overall return from the indexed annuity or deferred annuity over the surrender term.
Insurance agents and advisors are generally not supposed to give detailed investment advice as to which allocations will make you more money or are better for you.
This is because doing so would (on the underlying market index) might be considered investment advice which would require a securities license.
So (like most of our clients) what do you do if you don't know enough to make the decisions yourself? The Fixed Indexed Annuity Allocations Comparison Calculator is designed to give you a way to compare how common fixed indexed annuity allocations would compare and contrast with each other given random and hypothetical market data.
Although the calculator does not contain every single allocation method offered today, the allocation strategies can be compares.
The calculator will not guarantee you any particular fixed indexed annuity with similar allocations will return X amount in Y circumstance.
It will give you an idea of how the allocation options work, and what they would return in a purely hypothetical (non real world) situation.
Once you understand how the allocation strategies correlate with each other, you can better prepared to pick your allocations yourself.
And you can put yourself in the drivers seat rather than leaving these critical decisions to your insurance agent or advisor.
After all, his or her recommendation is likely a guess anyways.