Indexed annuities and college savings plans

If you are in the midst of planning to start saving for your child’s college education, it may be a good idea to work with a financial planner who understands indexed annuities.  parents are looking for a lower risk investment that offers them gains that are tax free and have the stability of a money market account.

What are indexed annuities?

Simply put, these are insurance policies that provide income. Indexed annuities are typically tied to a stock index like the S&P 500 and the returns are based on the gains in the index. When using this type of an investment vehicle, your principal investment is protected until the time the surrender period ends. Since most indexed annuities are based on 10 year investments, if your child is 8 or younger, these investments work well. Even if your child is older, you may still be able to use an indexed annuity for their college expenses.

How safe are indexed annuities?

An indexed annuity is typically a fairly safe investment since your principal balance is protected throughout the life of the policy. Gains on your investment are credited to your account based on the performance of the S&P 500 and is subject to any caps that are placed on the policy.

How much can I earn in interest payments?

Like most annuities, you can purchase indexed annuities that have a minimum return guaranteed.  Each contract should be reviewed carefully and discussed with your financial advisor so you are aware of how much you can earn. Since each contract is different, there is no single answer that would apply to each contract.

What terms are offered on indexed annuities?

Like most annuities, there are various terms available. Contract terms may be as short as one year with an option to renew at the end of the term. The most common contract length for indexed annuities is six or seven years.

Are indexed annuities right for me?

The best way to determine if an indexed annuity is the right investment vehicle for your needs is to discuss them with your investment advisor. No single program is right for every investor.

Parents are always concerned about the rising cost of college in the United States. Indexed annuities can help you save for college, protect your principal balance and provide good returns.  You can secure your child’s future by ensuring when they are ready for college the money will be there for them to attend.