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Can You Make Money With a Spread / Margin fee in a fixed index annuity?SummaryIn this 1:10 Annuities Explained video, Jeffrey Scott McLeod, LUTC, covers “Can You Make Money With a Spread / Margin fee in a fixed index annuity?.” Can you make money with a spread margin or administrative fee within a fixed index annuity? They point out that monthly averaging is a superior calculation in their research. Let's say the the Dow begins at a th00and and on each month ofversary you write down where the index is on that day. At the end of the year you have 12 figures written down. Divide by 12 and you get an average. So in a sideways market point to point you can get a positive gain. If your margin is 3% and it goes up by 10, you subtract three from 10 and your interest is seven. Be sure to look at the research out of Wharton School of Business in Pennsylvania and get the buyer guide prepared by the National Association of Insurance Commissioners Insurance education only—not securities advice. Key takeaways
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From the NAIC Buyer’s GuideIndex interest formulas may use features such as participation rates, cap rates, and spread/margin rates, so credited interest may reflect only part of an index change. If the index goes down over the period, zero interest is added for that feature and annuity value will not go down from that index change as long as you do not withdraw the money. Fixed indexed annuities are a type of fixed annuity that earn interest based on changes in a market index; the interest rate is guaranteed never to be less than zero, even if the market goes down. When you buy an indexed annuity, you are not investing directly in the market or the index. Common indexing methods described in NAIC materials include annual reset (ratcheting), high-water mark, and point-to-point. The indexing method is the approach used to measure the amount of change, if any, in the index. Sources: NAIC Buyer’s Guide for Deferred Annuities (2022); NAIC Buyer’s Guide for Fixed Deferred Annuities — Appendix for Equity-Indexed Annuities (2007 materials). The guides do not endorse any company or policy. State insurance departments: www.naic.org. Questions about fixed index annuities? Call or text 501-658-9882 · Book a time on the calendar Insurance-only disclaimer Jeffrey Scott McLeod, LUTC, is a licensed insurance producer. Content on this page is educational and discusses insurance products only—not securities, brokerage, or investment advisory services. Texas license 901162. Arkansas / National Producer Number 558629. Product availability, rates, and features vary by state and insurer. Read the NAIC Buyer’s Guide and the insurance contract before you buy. More videos |
Jeffrey Scott McLeod, LUTC — Licensed insurance producer. Texas license 901162. Arkansas / National Producer Number 558629. Insurance products only; not securities or investment advisory services.
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