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What Is A 401k Rollover To An IRA Fixed Index Annuity?
Your 401k rollover to an IRA equity-indexed annuity is a fixed annuity, that earns interest or provides benefits that are linked to an equity index. The value of the index might be tied to a stock or other equity index. One of the most commonly used indices is Standard & Poor's 500 Composite Stock Price Index (the S&P 500)1, which is an equity index. The value of any index varies from day to day and is not predictable.
When you tax free rollover your 401(K) to an IRA fixed indexed annuity you own an insurance contract. You are not buying shares of any stock or index.
Your 401k rollover to an IRA indexed annuity, promises to pay a minimum interest rate. The rate that will be applied will not be less than this minimum guaranteed rate even if the index is lower. The value of your 401k rollover annuity also will not drop below a guaranteed minimum. For example, some 401k annuity contracts guarantee the minimum value will never be less than 100 percent of the premium paid, plus at least 3% in annual interest (less any partial withdrawals). The guaranteed value is the minimum amount available during a term of withdrawals and death benefits. The insurance company will adjust the value of the 401k annuity at the end of each year to reflect any stock index increases.
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