Understanding FIA Indexing Strategies: Options, Benefits, and Considerations

Fixed Indexed Annuities (FIAs) have become a popular choice for retirement savers looking to balance growth potential with principal protection. A key feature of FIAs is the variety of indexing strategies they offer, allowing you to tailor your annuity to fit your financial goals. Here’s an in-depth look at FIA indexing strategies, their benefits, and key considerations to help you make an informed decision.

What Are FIA Indexing Strategies?

FIA indexing strategies determine how interest is credited to your annuity. The performance of a market index, such as the S&P 500, drives the growth of your contract value, but without exposing your initial principal to market losses. These strategies vary in how they calculate interest and distribute potential gains.

Common FIA Indexing Strategies

1. Annual Point-to-Point with Cap Rate:
   • Measures the index’s performance over a one-year period.
   • Interest is credited up to a maximum cap rate (e.g., 5%).
   • Ideal for those seeking consistent and generally steady growth subject to a cap. 
2. Monthly Point-to-Point:
   • Tracks the index’s monthly performance and sums the results annually.
   • Includes a cap for each month.
   • Suitable for those who want exposure to monthly market movements.
3. Participation Rate:
   • A percentage of the index’s growth is credited to your account (e.g., 80%).
   • No cap rate but may include a spread fee.
   • Offers higher growth potential for moderate risk-takers.
4. Two-Year Point-to-Point:
   • Tracks index performance over a two-year period.
   • Offers higher potential caps or participation rates compared to one-year options.
   • Great for individuals comfortable with longer periods to realize returns and seeking potentially higher returns.
5. Fixed Interest Strategy:
   • Provides a guaranteed, fixed rate of interest.
   • Offers stability and predictability.
   • Suitable for conservative investors.

Benefits of FIA Indexing Strategies

1. Principal Protection:
   • No matter how the market performs, your principal is protected from losses.
2. Growth Potential:
   • Interest is linked to market performance, providing opportunities for gains without direct market exposure.
3. Customization:
   • Multiple strategies allow you to align your annuity with your risk tolerance, time horizon, and financial goals.
4. Tax-Deferred Growth:
   • Earnings grow tax-deferred under the current tax code, thereby maximizing the power of compounding.

Key Considerations

1. Caps, Participation Rates, and Spreads:
   • Understand how these features limit or enhance your potential returns. A higher cap or participation rate typically offers more growth potential but may involve trade-offs.
2. Market Index Options:
   • Different FIAs offer varying indices, such as the Nasdaq 100 or Russell 2000, in addition to the S&P 500. Diversifying your index choices can help mitigate risks.
3. Time Horizon:
   • Longer strategies, like two-year point-to-point, may offer higher returns but require patience.
4. Fees and Riders:
   • Some strategies involve spread fees or optional riders. Ensure these align with your financial goals.
5. Tax Treatment:
   • You won’t pay taxes until you make withdrawals, however, withdrawals are generally taxed at ordinary income tax rates. 

Choosing the Right Strategy

Selecting the right indexing strategy depends on your personal preferences and financial objectives. Ask yourself:

• Do I prioritize steady, predictable growth or higher potential returns?
• Am I comfortable with longer time horizons?
• What is my risk tolerance?
• What are my financial goals? 

A financial professional can guide you through these questions and recommend a strategy that fits your needs.

Discover the Oceanview Difference

• Financial Strength You Can Trust: Rated “A” (Excellent) by A.M. Best, showcasing our solid financial foundation, providing you with confidence regarding Oceanview’s commitment to meeting obligations.
• Simple, Transparent Retirement Solutions: Straightforward annuity products designed to help you meet your retirement objectives.
• Competitive Rates and Flexibility: Benefit from competitive rates and a variety of durations and crediting strategies.
• Client-Centric Approach: Features such as free withdrawals, nursing home and terminal illness waivers, and full liquidity for beneficiaries upon the annuitant’s death demonstrate our commitment to your financial security and peace of mind.

Disclaimers

Guarantees are based on the financial strength of the issuing carrier. The multi-year guarantee annuity product with form number IIC19 OLA SPDA, or variations of such, are issued by Oceanview Life and Annuity Company (d/b/a Oceanview Life and Annuity Insurance Company in California; NAIC# 68446). May not be available in all states. Not available in the state of New York or Vermont. Policy form numbers and provisions may vary. Rates are guaranteed depending on the guarantee period selected at policy issue.

Annuities issued by Oceanview Life and Annuity Company, 1819 Wazee Street, 2nd Floor, Denver, CO 80202. In California, doing business as Oceanview Life and Annuity Insurance Company www.oceanviewlife.com.

HARBOURVIEW ANNUITIES ARE PRODUCTS OF THE INSURANCE INDUSTRY AND NOT GUARANTEED BY ANY BANK NOR INSURED BY THE FDIC OR NCUA/NCUSIF OR ANY OTHER FEDERAL GOVERNMENTAL AGENCY. MAY LOSE VALUE. NO BANK/CREDIT UNION GUARANTEE. NOT A DEPOSIT. MAY ONLY BE OFFERED BY A LICENSED INSURANCE AGENT. GUARANTEES ARE SUBJECT TO THE CLAIM PAYING ABILITY OF THE ISSUING INSURANCE COMPANY.

Annuities are generally designed as long-term retirement solutions and have certain limitations. They are generally not intended to replace emergency funds, serve as income for day-to-day expenses, or support short-term savings goals.  Please review the contract for full details.  

A.M. Best Rating as of December 11, 2024, is subject to change. A (Excellent) rating is third highest of fifteen possible rating classes for financial strength. The outlook assigned to these Credit Ratings is stable.

This material is a general description intended for general public, educational use. Oceanview Life and Annuity Company is not providing investment advice for any individual or in any individual situation, and therefore nothing in this correspondence should be read as such. 

Withdrawals in excess of any Free Partial Withdrawal amounts are subject to a Surrender Charge and Market Value Adjustment (MVA). The MVA may have the effect of increasing or decreasing the Surrender Value of the withdrawal depending on the market interest rate changes.

The IRS may impose a penalty for withdrawals prior to age 59 ½.

Contracts purchased in an IRA or other tax-qualified plan provide no additional tax-deferral benefit, since they are already afforded tax-deferred status. All annuity features, risks, limitations, and costs should be considered prior to purchasing an annuity within a tax-qualified retirement plan. For non-qualified annuities, tax deferral is not available to corporations and certain other entities.

While care was taken in preparing this information and it is considered reliable, contract, application, illustration, and product disclosure language should be relied upon when contrary. The Company reserves the right to correct any typographical errors that may exist.  

Rates, renewal caps, and declared interest rates, will always follow contract provisions relative to minimums and maximums stated.  Oceanview determines, at its discretion, the rates, renewal caps and, declared interest rates above the contractual minimums that are guaranteed.