Long-form
Monthly Point-to-Point: The Annuity Feature Most Retirees Don't UnderstandSummaryIn this 1:25 Annuities Explained video, Jeffrey Scott McLeod, LUTC, walks through the topic in plain English. Did you know monthly point-to-point within a fixed index annuity is one of the most exciting and easiest to explain features within a fixed index annuity? First month, well you have a monthly cap of two. Next month by three, your cap is two. And let's say the index goes down by 10% the. Well, there is no cap on the downside calculation. Next month the S&P or the index retraces all the down move, but your cap is at two. Next month it goes up let's say another 10%, well your cap is two, then you're at even. So that's the drawback to monthly point-to-point within a fixed index annuity as opposed to monthly averaging, which I'll explain in the Insurance education only—not securities advice. Key takeaways
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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