How Does The Monthly Sum Cap Work With Annuities?

Shawn Plummer

CEO, The Annuity Expert

Are you familiar with how a monthly point-to-point (monthly sum) works in fixed-indexed annuities? If not, don’t worry. You’re about to learn everything you need to know.

What Is The Monthly Sum?

Monthly Sum Cap is also known as the “Monthly Point-to-Point.” It is a unique interest crediting strategy for indexed annuities. It offers strong interest potential during market upturns but protects your premiums and interest earned from losses due to market downturns.

How Does The Monthly Sum Work?

Each month where the index increases relative to the prior calendar month, an interest rate (up to the monthly cap) is assigned to the current month.

In any month where the index decreases relative to the prior calendar month, a negative interest rate is assigned to the current month.

There is no floor for monthly negative interest assignments.

At the end of a 12-month period, the interest assigned to each month (both positive and negative) is summed to determine annual credited interest.

When the total of the assigned interest rates for the 12-month period is positive, that interest rate is credited to the policy.

What Happens If The Monthly Sum Return Is Negative?

If the total of the assigned interest rates is negative for the 12-month period, you’ll receive 0% interest for the year. Still, you’ll never lose a penny of your premiums paid and interest credited. 

Next Steps

Monthly point-to-point (monthly sum) is an important concept to understand when shopping for a fixed-indexed annuity. This annuity calculation determines how your contract will grow each month and is something you should definitely consider when making your decision. If you’re still unsure after reading this guide, don’t hesitate to contact us for more information or a quote. We would be happy to help!

How Does The Monthly Sum Cap (Monthly Point To Point) Work With Annuities?

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Shawn Plummer

CEO, The Annuity Expert

I’m a licensed financial professional focusing on annuities and insurance for more than a decade. My former role was training financial advisors, including for a Fortune Global 500 insurance company. I’ve been featured in Time Magazine, Yahoo! Finance, MSN, SmartAsset, Entrepreneur, Bloomberg, The Simple Dollar, U.S. News and World Report, and Women’s Health Magazine.

The Annuity Expert is an online insurance agency servicing consumers across the United States. My goal is to help you take the guesswork out of retirement planning or find the best insurance coverage at the cheapest rates for you. 

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