| I couldn't but help feeling a little blue over Tiger | | | | Explanation: The stock market, Dow Jones Index |
| Woods feeble attempt to rally back in the final round | | | | (DJIA) starts at 12,000 and moves to 13,000 in three |
| of the Master's Golf Tournament last month. I | | | | years. Without the reset feature, you would gain |
| thought of the term "mulligan"; coined after a fellow | | | | credits of about 8%, or $8,000 after year one. In |
| so named who took to re-playing his errant shots on | | | | year two the market loses 15%, as the market |
| the course with the hope of a better score. Without | | | | retreated from 13,000 to 11,000. Your credit was |
| Tiger's 3 bogies on Sunday, he may have caught the | | | | zero, since you are guaranteed no losses in a FIA. |
| leader and sent the match into sudden death. As to | | | | Since year two's close is 11,000, and you started the |
| investing, wouldn't it be great to re-do our | | | | program at 12,000, under normal conditions, you |
| investments after a bad year, wiping the slate clear | | | | would still be losing money at the start of year #3. |
| to a more promising outcome in year 2? | | | | But with the "no losses in down years" feature, you |
| As retirement becomes a larger and more important | | | | are up 8% after two years. Because of annual reset, |
| goal of so many of us, I have a solution to | | | | you start year #3 at 11,000. The market does well, |
| accomplish such. It's called the "annual reset", and is a | | | | rising 2,000 points to 13,000. Your credits are $8,000 |
| feature made available inside a fixed index annuity | | | | since the cap is 8% in any one year period. |
| (FIA). With a little explanation, I'm sure you will agree | | | | Remember, the crediting cap is needed to protect |
| that it is a valuable benefit to grow your savings, | | | | your account in the down years. If we took this |
| while avoiding any loss of your principal along the | | | | illustration out for another two years, where the |
| way. | | | | market gained 5% in years 4 and 5, your account |
| The annual reset feature allows you to earn index | | | | would grow to $128,600 using the reset feature. |
| credits, similar to interest, on a one year time frame. | | | | Without it, you would have $119,400. That's quite a |
| Each one-year time frame is "reset" using the last | | | | difference, $9,200 more money by my count. |
| value of the index. Prior gains in your annuity are | | | | In summary, the combination of annual reset and a |
| locked in. Let's work through an example and follow | | | | guarantee of no losses in down years, make this |
| how the numbers hit the page. | | | | benefit within a fixed index annuity valuable for |
| Date DJIA start DJIA finish % change Credit Ending | | | | investors worried about market risks, while trying to |
| value | | | | keep their investments growing before retirement. |
| 2008-09 12,000 13,000 +8% +8% $108,000 | | | | Now maybe I can convince the P.G.A. to apply this |
| 2009-10 13,000 11,000 -15% +0% $108,000 | | | | concept to tournament play - that would indeed be |
| 2010-11 11,000 13,000 +18 +8% $116,640 | | | | interesting to watch. |