How Your Savings Can Grow With an Indexed Annuity

Why is the upside potential of an indexed annuity?

The potential growth of an indexed annuity is based on the performance of a market index in a given period (usually over a one- or two-year period).

Indexed annuities typically offer a choice of interest crediting strategies based on different market indexes.

What indexes can I choose from when I get a National Life Group annuity?

Indexed annuities from National Life offer a choice between three market indexes.

S&P 500 Index

The S&P 500® is widely regarded as the best single gauge of the U.S. equities market. This world-renowned index includes a representative sample of 500 leading companies in leading industries of the U.S. economy. Although the S&P 500® focuses on the large-cap segment of the market, it is also an ideal proxy for the total market.

US Fundamental Balanced Index

This index aims to minimize volatility through a blend of U.S. equities, U.S. treasuries, and cash. The asset classes are rebalanced daily to seek to minimize risk, and the mix of U.S. equities is revised quarterly. This index was created and is owned by PIMCO.

Global Balanced Index

This index aims to enhance risk-adjusted returns by tracking a blend of global asset classes: equities, bonds, and commodities. The index composition is rebalanced among asset classes monthly based on the SG Sentiment Indicator. This indicator is made up of six cross-asset market risk measures. The overall allocation is then reviewed daily to reduce market exposure in case of high volatility. This index was created and owned by Société Générale.

Which index strategy should I choose?

That is up to you! No one can predict how the market will perform — and just because a strategy performed a certain way in the past, doesn’t mean it will perform that way in the future. You can also pick more than one strategy. However, remember that diversification does not assure a better return.

What if I am worried about getting an indexed annuity just before a downturn?

With the point-to-point method, you have the option to spread your premiums over 12 months, using Dollar Cost Averaging. If you choose to allocate all of your premium to a DCA account, 1/12th of your premium is moved into the index strategy of your choice each month, receiving that month’s rate for a 1-year or 2-year period.

You can also choose to allocate only a portion of your premium to a DCA account (with a minimum of $5,000), and every month, you have the option to move all remaining premium into an index strategy of your choice.

Spreading out your premium over a 12-month period helps capitalize on more potential interest rate crediting dates and reduces risk associated with one annual crediting anniversary. However, this does not guarantee better outcomes.

Until allocated into a monthly crediting strategy, premiums will earn interest in a fixed interest crediting account.

Are there other interest crediting methods?

Yes, you can opt for a monthly sum cap method.

This method is similar to the point-to-point method, but interest crediting is based on the monthly index change, with a cap for that month. The 12 monthly changes, including negative percentages, are totaled at the end of every year to determine the interest credit.

Can I change strategies?

Yes, you can change index strategies at any time. Your new strategies will take effect at the beginning of the next crediting period. You can change your allocations using the National Life Group customer portal or via our app.

Will my savings grow as much as when I invest directly in the stock market?

Not necessarily. How much interest you are credited depends not just on the performance of the market index, but also on the participation rate and whether there is a cap.

What is a cap?

The cap determines the maximum interest you can earn in a period. For example, if the index grows by 10% but your cap is 6%, your policy will be credited with 6% interest.

Not all index strategies are capped.

What is the participation rate?

The participation rate determines how much of the market index gains are credited to your policy.

Here are examples illustrating how interest is credited for a specific time period (known as “point to point”), which can be one or two years:

• If the market index gained 8.00% and the participation rate is 140%, you would get credited 11.20% if there is no cap.
• If the market index gained 8.00% and the participation rate is 60%, you would get credited 4.80% if there is no cap.
• The participation rate can also be 100%. In that case, you would get credited at the same rate as the market index gain if there is no cap.

What are performance trigger strategies?

National Life Group’s flexible premium and single premium indexed annuities offer a performance trigger index crediting strategy. This strategy offers a fixed rate as long as the index performance is not negative. If the market index value went down, you will be credited 0.00%, so you will never lose a penny of your deposits and earned interest — any gains are locked in.

What is the downside protection offered by an indexed annuity?

Sometimes markets go down and an index may lose value in a given period. If you are invested directly in the index, like when you invest in the stock market, you would lose money during a downturn.

That’s not true for indexed annuities from National Life Group. When a market index goes down, you are protected from loss. All our indexed annuities offer a zero percent floor — the least interest you are ever credited is 0%.

Next steps?

Find out what is best for you and your unique situation: Work with your agent or a financial/tax professional.