Index Annuity Crediting Methods

When you purchase an indexed annuity, there are several crediting methods available to you. Each method has its own unique features that may vary depending on the market scenario.

Common features

The initial margin, participation rate/index margin and index cap rates will be set at the time the annuity is issued. These limits are guaranteed for the initial term of your contract (usually a year), but will be re-set for subsequent terms when applicable. We guarantee that these rates will not be set lower than the specified minimum for participation rates and index cap rates, or higher than the specified maximum for index margins. Hit on this link: https://safewealthplan.com/annuity-crediting-methods/ to explore more about this subject.

Monthly Sum The most volatility sensitive crediting method, this method uses the change in the index price each month over the term of your contract to determine interest credits. If the price is above the cap, you receive a percentage of the index's increase, and if it is below the cap, you receive 0%.

Annual Reset Lock in interest credits each contract anniversary The annuity offers a reset feature, so the value of any credits you receive are locked in at the end of each contract anniversary. This is an important feature, especially when market conditions are volatile.

Term Point-to-Point with Enhanced Participation Rate and strategy charge

The indexed interest for this type of annuity is based on a formula that includes the change in the index value, and the participation rate. Some annuities also subtract a percentage of any gain (spread) that the index achieves in a specified period, which is credited to you as indexed interest. Click here to learn more about the crediting services.

Two-year Point-to-Point With Enhanced Participation Rate and strategy charge

This method is similar to the annual reset option, but instead of annually, the changes are made two years after your initial contract anniversary date. The difference between the starting and ending index values is compared to the beginning index value and the index value two years later on January 3. This equation will show how the Two-year Point-to-Point crediting method/index account option works.

This method is a good choice for clients who are comfortable with the potential market volatility and want to minimize the impact of mid-year market declines. It is available on many Midland National fixed index annuities. You can find more information about this option by contacting our specialists. This link: https://en.wikipedia.org/wiki/Credit will open up your minds even more on this topic.