CONSIDER USING Fixed Index ANNUITIES FOR YOUR BENEFICIARIES

A fixed index annuity is a type of insurance contract designed to provide long-term retirement savings, where your returns are tied to the performance of a market index (such as the S&P 500) but with protections ensuring you don’t lose your principal if the market declines.annuity+2

Key features include:

• Earnings are credited based on index performance, subject to contract limits such as caps (maximum interest credited) and participation rates (the percentage of the index gain you receive).guardianlife+1
• Minimum guaranteed interest rate and principal protection: Even if the chosen index declines, your principal and minimum interest (if specified) are protected, so you won’t lose money due to market downturns.thrivent+2
• Tax-deferred growth: Earnings in a fixed index annuity grow tax-deferred until withdrawn.guardianlife+1
• Withdrawals and income options: At the end of the accumulation period, you may take income as a lump sum, fixed period payments, or as lifetime guaranteed income.athene+1

Unlike variable annuities, fixed index annuities do not directly invest in the stock market, and unlike traditional fixed annuities, their rate of return is not fixed, but instead varies with the associated index—though always with downside protection.thrivent+1

These products suit individuals seeking tax-advantaged growth potential with some market-based upside, but who also want to guard against market losses.

Historically, fixed index annuities (FIAs) linked to the S&P 500 have provided returns that differ significantly from direct investments in the S&P 500 itself. Here's a detailed comparison based on historical data and typical FIA features:

1. S&P 500 Historical Performance:
   
   • The S&P 500 has delivered an average annual return of about 10.33% since 1957, with the real return (adjusted for inflation) around 6.47%.
   • These returns include price appreciation as well as dividends reinvested.
   • The index has experienced significant volatility, including major downturns during recessions, the dot-com bust, and the 2008 financial crisis, but historically it has bounced back with strong recoveries over the long term.

1. Fixed Index Annuities Linked to the S&P 500:
   
   • FIAs credit interest based on the changes in a market index like the S&P 500 but with key protections: principal is protected (no loss in market downturns) and returns are limited by features such as caps, spreads, or participation rates.
   • Because of these limits, FIAs typically deliver lower average returns compared to direct S&P 500 investments. For example, a common calibrated cap rate might limit average returns to around 6.64% annually over long periods.
   • They provide a "floor" at zero, so there are no negative returns even in years when the S&P 500 falls, which reduces risk and principal loss but also limits upside gains.
   • Participation rates and caps mean FIAs capture only a portion of the S&P 500’s positive gains (e.g., 50% participation rate means if the S&P 500 gains 10%, the FIA might credit only 5%).

1. Performance Comparison:
   
   • Over long periods, FIAs have historically earned returns less than the S&P 500’s average returns but offer protection against losses that occur during market downturns.
   • The average annual return on FIAs linked to the S&P 500 is often around 3-7%, whereas the S&P 500 itself has averaged about 10% (not accounting for volatility and losses).
   • This trade-off benefits investors seeking to avoid losses and preserve principal rather than maximize growth fully exposed to market risk.

In summary, while direct investment in the S&P 500 has historically generated higher average returns, fixed index annuities linked to the S&P 500 offer principal protection by guaranteeing no loss of principal and buffering against market downturns. The average returns on such annuities tend to be lower due to caps and participation rates but provide a safer, more stable alternative for conservative investors focused on preserving capital with some growth potential linked to the market.

This means FIAs serve well as a conservative growth-plus-protection vehicle in a retirement portfolio, while direct S&P 500 investments are more suited to investors with a higher risk tolerance willing to ride out market volatility for potentially greater gains.

 For senior citizens willing to take market risk, fixed index annuities (FIAs) indexed to the S&P 500 offer principal protection plus some participation in market gains, but generally have lower growth potential and less liquidity compared to directly purchasing the S&P 500 index. FIAs guarantee the return of principal even if the market falls, provide tax-deferred growth, and may offer lifetime income options, making them appealing for retirees seeking safety and steady income with moderate upside.

However, FIAs differ from direct S&P 500 investments in key ways:

• FIAs do not invest directly in the market; interest earnings are linked to index performance but subject to caps, participation rates, or spreads, limiting upside gains.
• Principal is protected against market downturns with no loss of initial investment, unlike direct index investments which fluctuate with the market.
• FIAs typically have higher fees, complex terms, surrender charges, and limited liquidity, meaning funds are not easily accessed without penalty.
• Direct S&P 500 investments, such as through index funds, have higher growth potential over the long term but come with market risk and no principal guarantees.

For seniors who prioritize protecting their retirement principal and want some market-linked growth without risking market losses, FIAs can be suitable as part of a conservative, diversified retirement portfolio. Those who are comfortable with market risk and seek maximum growth may prefer direct S&P 500 investing instead.

In summary, fixed index annuities indexed to the S&P 500 are a good investment choice for seniors seeking downside protection with some market upside, but they come with trade-offs in growth potential, fees, and liquidity compared to direct S&P 500 investments. The choice depends on individual risk tolerance, income needs, and retirement goals.

Fixed index annuities (FIAs) indexed to the S&P 500 can be a good investment choice for senior citizens who want to avoid market risk because they offer principal protection while allowing partial participation in the market's upside growth. Unlike directly purchasing the S&P 500 index shares, FIAs protect the principal from losses in market downturns but also limit gains through caps, participation rates, or spreads. In contrast, direct investment in the S&P 500 carries full market risk and potential for unlimited gains or losses.

Key points to consider:

• FIAs provide principal protection: Your original investment is not lost during market declines because you are not directly invested in the market but rather credited interest based on the index's positive performance, subject to limits like caps or participation rates.
• Market participation is partial and capped: You benefit from some of the index gains, but often only a percentage (e.g., 50% participation) and up to a maximum cap, limiting your upside potential compared to the full market return.
• FIAs offer tax-deferred growth and options for guaranteed lifetime income, which can be appealing for retirement planning.
• Liquidity is limited: FIAs are designed as long-term products, with potential surrender charges and penalties for early withdrawals, unlike direct investments in the S&P 500 index funds which are more liquid.
• FIAs generally have higher fees and complexity compared to buying an S&P 500 index fund directly, which has low fees and full exposure to market returns.

In summary, for seniors who prioritize capital preservation and prefer to avoid direct market risk, fixed index annuities linked to the S&P 500 can be suitable. However, they offer less growth potential and less liquidity than direct S&P 500 investments. Direct index investing involves full risk but offers unlimited market upside and easier access to funds. Choosing between them depends on risk tolerance, income needs, and investment goals.

In the last hundred years, the S&P 500 index has had about 25 years with negative returns. This means the index was down for the year roughly 25 times since around 1928.

Additional details include:

• Negative years represent about 27% of all years since 1928, meaning roughly 73% of the years had positive returns.
• Among these down years, 11 experienced double-digit losses.
• Multiple consecutive years of negative returns have occurred but are rare. There have been about 8 instances of two consecutive down years and only three instances of three consecutive down years. Just once during the Great Depression, the index fell for four years in a row.
• Despite these down years, the S&P 500 has shown strong average growth over the long term, averaging about 10-11% annual growth including dividends over the past century.

This analysis is consistent with data showing annual historical returns from 1928 to 2024.

Fixed index annuities (FIAs) indexed to the S&P 500 can be a good investment choice for senior citizens who want to avoid market risk because they offer principal protection while allowing partial participation in the market's upside growth. Unlike directly purchasing the S&P 500 index shares, FIAs protect the principal from losses in market downturns but also limit gains through caps, participation rates, or spreads. In contrast, direct investment in the S&P 500 carries full market risk and potential for unlimited gains or losses.

Key points to consider:

• FIAs provide principal protection: Your original investment is not lost during market declines because you are not directly invested in the market but rather credited interest based on the index's positive performance, subject to limits like caps or participation rates.
• Market participation is partial and capped: You benefit from some of the index gains, but often only a percentage (e.g., 50% participation) and up to a maximum cap, limiting your upside potential compared to the full market return.
• FIAs offer tax-deferred growth and options for guaranteed lifetime income, which can be appealing for retirement planning.
• Liquidity is limited: FIAs are designed as long-term products, with potential surrender charges and penalties for early withdrawals, unlike direct investments in the S&P 500 index funds which are more liquid.
• FIAs generally have higher fees and complexity compared to buying an S&P 500 index fund directly, which has low fees and full exposure to market returns.

In summary, for seniors who prioritize capital preservation and prefer to avoid direct market risk, fixed index annuities linked to the S&P 500 can be suitable. However, they offer less growth potential and less liquidity than direct S&P 500 investments. Direct index investing involves full risk but offers unlimited market upside and easier access to funds. Choosing between them depends on risk tolerance, income needs, and investment goals.

Historically, fixed index annuities (FIAs) tied to the S&P 500 have generally offered returns that fall between the higher growth potential of the stock market and the stability of bank CDs and bonds. Since the S&P 500's inception in 1957, its average annual return is about 10.67%, but FIAs typically cap or limit the credited interest to provide principal protection, resulting in lower average returns with reduced risk.

For example, an FIA with an 11% cap tied to the S&P 500 showed an average annual return of about 6.64% from 1957 to 2023, with no loss of principal since returns cannot be negative in such contracts. Over shorter periods (2001 to 2023), an FIA might average around 9.28%, still less than the full index returns but with downside protection. Another example shows an FIA with a 50% participation rate and an 8% cap generated about a 5.4% annual return from 1984 onward, which was about 40% better than comparable fixed annuities based on CDs and offered more safety than directly holding the index during negative years.

Compared to bank CDs and bonds, which offer stable but typically lower returns (often in the 1-4% range historically), FIAs provide upside linked to stock market gains but with protection against losses by setting floors at zero and capping gains. This makes FIAs attractive for conservative investors seeking growth above CDs/bonds but without market risk.

In summary, fixed index annuities linked to the S&P 500 usually outperform bank CDs and bonds over the long term by offering moderate growth with principal protection, though their returns are lower than the full raw S&P 500 index returns due to caps and participation rates.

This historical balance of growth and safety is why FIAs have gained popularity as retirement products, especially compared to steady but low-yield bank instruments and bonds.

Pending.

Pending.

You cannot lose money on a fixed index annuity linked to the S&P 500 index because these annuities guarantee the protection of your principal, meaning you won't lose your original investment due to stock market declines or negative index performance. If the index performs well, you get credited interest based on the annuity’s participation in the index gains, but if the index goes down, your contract value does not decrease—you either get a 0% return or a minimum guaranteed rate.

However, the tradeoff is that your upside is limited. The gains credited to you are indirectly linked to the index, and factors like participation rates, interest rate caps, and spreads reduce how much of the index’s gains you receive. Also, the insurer can change these crediting rates annually. So, while you don't lose money, you may earn less than if you had invested directly in the stock market.

In summary, fixed index annuities offer principal protection with no risk of loss, but returns are often capped and limited, so you won't fully participate in the S&P 500’s upside.

The insurance company that issues a fixed index annuity (FIA) does not directly purchase the S&P 500 index or its underlying stocks. Instead, the company uses derivatives, such as options or futures contracts, to provide returns linked to the index's performance. The annuity contract credits interest based on the changes in the index, but the investor does not own the index or shares in the companies in the S&P 500 itself.

Key points:

• The S&P 500 index is used as a benchmark for calculating gains, but the insurance company manages the annuity using financial instruments that replicate exposure to the index's performance without owning the actual securities.
• Because there is no direct investment in the index's stocks, FIAs typically do not capture dividends paid by the companies in the index, which means returns may be lower than total index returns including dividends.
• The insurance company usually offers a floor that protects the principal from losses if the index performs negatively, while gains are subject to caps, participation rates, or spreads, limiting upside potential compared to direct stock ownership.
• The contract may give the insurer discretion on crediting rates and allocation within the account, sometimes shifting funds into fixed accounts with guaranteed minimum interest.

Thus, the FIA’s linkage to the S&P 500 is essentially an index-linked crediting mechanism rather than ownership or purchase of the index itself. The insurer provides the product with principal protection and growth potential tied to—but not replicating—the S&P 500's performance.

Commissions on fixed index annuities typically range from 6% to 8% of the purchase amount as a one-time payment to the financial professional, which is paid by the insurer rather than directly by the buyer. In contrast, money management fees are usually charged as an annual ongoing percentage of assets under management (AUM), often around 1% per year, though they can vary from about 0.2% to 2% depending on advisor and account size.

Key differences include:

• Fixed index annuity commissions are a single, upfront cost, paid once at the time of purchase, which may appear high (6%-8%) but do not recur annually.
• Money management fees are ongoing annual fees that continuously reduce your portfolio value over time, typically about 1%, but could be more or less depending on the advisor or fund manager.
• When compared in present value terms over many years, ongoing management fees can add up to a higher total cost than a one-time annuity commission even if the one-time percentage looks large at first glance.
• Management fees may be tiered or flat and cover portfolio management, advisory services, and administrative costs, whereas annuity commissions compensate the insurance agent and cover sales-related expenses.
• Fee-based annuities may have lower upfront commissions but include annual management fees, whereas commission-based annuities rely more heavily on upfront commissions.

In summary, fixed index annuities involve a higher upfront commission (6-8%), while money management typically involves a lower but recurring annual fee (~1%). The total cost comparison depends on the duration and growth of investments but structurally, commissions are paid once, fees repeatedly.

As a risk-averse senior citizen looking to pass assets to your family, the best approach involves careful estate planning to protect your wealth, avoid complications, and ensure your wishes are honored. Here are key strategies tailored for risk-averse seniors:

1. Establish a Will and Power of Attorney

• Create a clear will that specifies how your assets should be distributed. This reduces disputes and clarifies your intentions.
• Assign a trusted financial and healthcare power of attorney to manage your affairs if you become incapacitated.

1. Use Trusts for Asset Management and Protection

• Revocable Living Trusts let you maintain control of assets during your lifetime but allow smooth transfer to beneficiaries on death, avoiding probate.
• Irrevocable Trusts provide stronger protection by removing assets from your ownership, which can shield them from creditors, lawsuits, and Medicaid estate recovery.
• Trusts can protect family heirlooms, real estate, retirement accounts, and other valuables while streamlining transfer to heirs.

1. Avoid Probate with Joint Ownership and Beneficiary Designations

• Title assets jointly with rights of survivorship so they pass automatically to the surviving owner without probate.
• Use beneficiary designations on retirement accounts, life insurance, and payable-on-death accounts to transfer funds directly to heirs.

1. Protect the Family Home

• Consider a Life Estate Deed to retain the right to live in your home while ensuring it passes to heirs without probate.
• Transfer-on-Death (TOD) Deeds are a simple way to designate a home beneficiary, bypassing probate.
• Placing the home in an irrevocable trust can shield it from Medicaid estate recovery but requires giving up direct control.

1. Plan for Long-Term Care and Asset Protection

• Protect retirement accounts, which often have creditor protections, but be aware of state-specific rules.
• Consider long-term care insurance to cover custodial care costs and avoid depleting assets.
• Asset protection trusts and legal strategies can guard against financial scams and misuse, preserving assets for your family.

1. Review and Communicate Your Plan

• Regularly review your estate plan every few years or after major life events.
• Inform family members and executors about your plans to prevent surprises and conflicts.

Given your risk-averse profile, setting up trusts (both revocable and irrevocable) and using legal tools like powers of attorney and beneficiary designations offer both control and protection. Consulting with an elder law or estate planning attorney can help tailor these strategies to your specific financial situation and state laws, especially in New York where you reside.

These steps help ensure a smooth, efficient transfer of your assets to your loved ones while minimizing legal hurdles, taxes, and risks of loss through claims or scams. They also provide peace of mind that your legacy will be preserved according to your wishes.