How an Indexed Annuity Can Provide Growth When Saving for Retirement

What is the upside potential of an indexed annuity?

The potential growth of an indexed annuity is based on the performance of a market index in a given period (usually over a one- or two-year period).

Indexed annuities typically offer a choice of interest crediting options based on different market indexes.

Which index crediting option should I choose?

That is up to you! No one can predict how the market will perform — and just because an index crediting option performed a certain way in the past, doesn’t mean it will perform that way in the future. You can also pick more than one crediting option. However, remember that diversification does not assure profit or protection against a loss in declining markets.

What if I am worried about getting an indexed annuity just before a downturn?

With the point-to-point method, you have the option to spread your premiums over 12 months, using Dollar Cost Averaging (DCA). If you choose to allocate all of your premium to a DCA account, 1/12th of your premium is moved into the index crediting option of your choice each month, receiving that month’s rate for a 1-year or 2-year period.

You can also choose to allocate only a portion of your premium to a DCA account (with a minimum of $5,000), and every month, you have the option to move all remaining premium into an index crediting option of your choice.

Spreading out your premium over a 12-month period helps capitalize on more potential interest rate crediting dates and reduces risk associated with one annual crediting anniversary. However, this does not guarantee better outcomes.

Until allocated to a monthly crediting option, premiums will earn interest in a fixed interest crediting account.

Are there other interest crediting methods?

Yes, you can opt for a monthly sum cap method.

This method is similar to the point-to-point method, but interest crediting is based on the monthly index change, with a cap for that month. The 12 monthly changes, including negative percentages, are totaled at the end of every year to determine the interest credit.

Can I change crediting options?

Yes, you can change index crediting options at any time. Your new crediting option will take effect at the beginning of the next crediting period. You can change your allocations using the National Life Group customer portal or via our app.

How much will my cash value grow?

How much interest you are credited depends not just on the performance of the market index, but also on the participation rate and whether there is a cap.

What is a cap?

The cap determines the maximum interest you can earn in a period. For example, if the index grows by 10% but your cap is 6%, your policy will be credited with 6% interest.

Not all index strategies are capped.

What is a cap rate lock?

The cap can change after each crediting period. Choosing a Cap Rate Lock index crediting option keeps it from changing.

It lets you lock in a cap rate you’re comfortable with today. With this crediting option, the cap rate will remain unchanged for the entire guarantee period of the annuity.

What is the participation rate?

The participation rate determines how much of the market index gains are credited to your policy.

Here are examples illustrating how interest is credited for a specific time period (known as “point to point”), which can be one or two years:

• If the chosen market index gained 8.00% and the participation rate is 140%, you would get credited 11.20% if there is no cap.
• If the chosen market index gained 8.00% and the participation rate is 60%, you would get credited 4.80% if there is no cap.
• The participation rate can also be 100%. In that case, you would get credited at the same rate as the market index gain if there is no cap.

What are performance trigger strategies?

Flexible premium and single premium indexed annuities issued by the companies of the National Life Group offer a performance trigger index crediting option. This index crediting option offers a fixed rate as long as the index performance is not negative. If the market index value goes down, you will be credited 0.00%, so you will never lose a penny of your paid premiums and earned interest⁵ — any gains are locked in.

What is a trigger rate lock?

With a trigger rate lock index crediting option, your performance trigger rate stays the same for the entire term. So, for a five-year annuity, you can lock in a rate for five years. You can switch to this crediting option at any time. If you start later, the lock-in period will be shorter.

What is the downside protection offered by an indexed annuity?

When a chosen market index goes down, you are protected from loss. All our indexed annuities offer a zero percent floor — the least interest you are ever credited is 0%.

Next steps?

Find out what is best for you and your unique situation: Work with your agent or a financial/tax professional.

All guarantees and benefits of the insurance policy are subject to the claims-paying ability of the issuing insurance company. They are not backed by the broker-dealer and/or insurance agency selling the policy, or any affiliates of those entities other than the issuing company affiliates, and none makes any representations or guarantees regarding the claims-paying ability of the issuer.

Not a deposit – Not FDIC-Insured – May go down in value – Not insured by any federal government agency – Not guaranteed by any bank or savings associations.

Footnotes:

¹ The "S&P 500" is a product of S&P Dow Jones Indices LLC or its affiliates ("SPDJI") and S&P Opco, LLC and has been licensed for use by Life Insurance Company of the Southwest (“LSW”). Standard & Poor's® and S&P® are registered trademarks of Standard & Poor's Financial Services LLC ("S&P") and Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC (''Dow Jones"). The trademarks have been licensed to SPDJI and have been sublicensed for use for certain purposes by LSW. These fixed indexed annuities (“the Product”) are not sponsored, endorsed, sold or promoted by SPDJI, Dow Jones, S&P, any of their respective affiliates (collectively, "S&P Dow Jones Indices"). Neither S&P Dow Jones Indices nor S&P Opco, LLC make any representation or warranty, express or implied, to the owners of the Product or any member of the public regarding the advisability of investing in securities generally or in the Product particularly or the ability of the S&P 500 to track general market performance. S&P Dow Jones Indices and S&P Opco, LLC’s only relationship to LSW with respect to the S&P 500 is the licensing of the Index and certain trademarks, service marks and/or trade names of S&P Dow Jones Indices and/or its licensors. The S&P 500 is determined, composed and calculated by S&P Dow Jones Indices or S&P Opco, LLC without regard to LSW or the Product. S&P Dow Jones Indices and S&P Opco, LLC have no obligation to take the needs of LSW or the owners of Product into consideration in determining, composing or calculating the S&P 500. Neither S&P Dow Jones Indices nor S&P Opco, LLC are responsible for and have not participated in the determination of the prices, and amount of Product or the timing of the issuance or sale of the Product or in the determination or calculation of the equation by which the Product is to be converted into cash, surrendered or redeemed, as the case may be. S&P Dow Jones Indices and S&P Opco, LLC have no obligation or liability in connection with the administration, marketing or trading of the Product. There is no assurance that investment products based on the S&P 500 will accurately track index performance or provide positive investment returns. S&P Dow Jones Indices LLC is not an investment advisor. Inclusion of a security within an index is not a recommendation by S&P Dow Jones Indices to buy, sell, or hold such security, nor is it considered to be investment advice.

NEITHER S&P DOW JONES INDICES NOR S&P OPCO, LLC GUARANTEES THE ADEQUACY, ACCURACY, TIMELINESS AND/OR THE COMPLETENESS OF THE S&P 500 OR ANY DATA RELATED THERETO OR ANY COMMUNICATION, INCLUDING BUT NOT LIMITED TO, ORAL OR WRITTEN COMMUNICATION (INCLUDING ELECTRONIC COMMUNICATIONS) WITH RESPECT THERETO. S&P DOW JONES INDICES AND S&P OPCO, LLC SHALL NOT BE SUBJECT TO ANY DAMAGES OR LIABILITY FOR ANY ERRORS, OMISSIONS, OR DELAYS THEREIN. S&P DOW JONES INDICES AND S&P OPCO, LLC MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIMS ALL WARRANTIES, OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE OR AS TO RESULTS TO BE OBTAINED BY LSW, OWNERS OF THE PRODUCT, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE S&P 500 OR WITH RESPECT TO ANY DATA RELATED THERETO. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT WHATSOEVER SHALL S&P DOW JONES INDICES OR S&P OPCO, LLC BE LIABLE FOR ANY INDIRECT, SPECIAL, INCIDENTAL, PUNITIVE, OR CONSEQUENTIAL DAMAGES INCLUDING BUT NOT LIMITED TO, LOSS OF PROFITS, TRADING LOSSES, LOST TIME OR GOODWILL, EVEN IF THEY HAVE BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, WHETHER IN CONTRACT, TORT, STRICT LIABILITY, OR OTHERWISE. THERE ARE NO THIRD PARTY BENEFICIARIES OF ANY AGREEMENTS OR ARRANGEMENTS BETWEEN S&P DOW JONES INDICES AND LSW, OTHER THAN THE LICENSORS OF S&P DOW JONES INDICES.

² An indexed annuity’s 0% floor ensures that if index growth is negative during a crediting period, the interest credited to that strategy will not be less than 0%. This helps protect your premiums and any interest already credited from market declines. However, rider charges will still be deducted, even if no interest is credited. Indexed annuities do not directly participate in the market, market indexes, or any stock or equity investments. Guarantees are dependent upon the claims-paying ability of the issuing company.

³ Assuming no withdrawals during the withdrawal charge period. Rider charges continue to be deducted regardless of whether interest is credited.

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