When looking for an annuity, it’s essential to understand the different available features. One of the most important concepts to understand is the cap rate. This guide will explain a cap rate and how it works with annuities.
What Is A Cap Rate?
A cap rate is the maximum interest rate a policy owner can earn on their investment. The insurance company sets the cap rate, which can change over time.
For example, if a fixed indexed annuity has a 4% cap rate and the index grows by 10% in a given year, the policy owner will receive 4% interest on their annuity’s value.
How Does A Cap Rate Work With Annuities?
The cap rate is critical because it affects how your annuity grows over time. If you are looking for an annuity that will provide a steady income stream, you will want to choose a policy with a higher cap rate. On the other hand, if you are looking for an annuity that will grow over time, you will want to choose a policy without a cap rate.
Next Steps
The choice of which annuity is right for you depends on your financial goals. Contact us if you are unsure which annuity is right for you. We can help you understand the different features of each type of annuity and how they will work with your overall financial plan.
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