The Risk Market Fluctuation
The Risk Sequence of Returns
There is another risk that many people, including John and Annie, weren’t aware of until they sat down with their advisor or agent. The risk is negative returns early in retirement and how they can drastically affect the entire retirement picture. The reason many aren’t aware of this risk is because it isn’t a factor during the accumulation years. Luckily for them, the Highlander ® Fixed Indexed Annuity prevents any negative account balance movement due to market losses. In fixed indexed annuities...zero is definitely your hero.
John remembers his accounts taking a sizable hit during the last recession and knows they were lucky to have the time to regrow their assets to their previous values. However, for John and Annie, time is no longer on their side. A big loss in their assets could mean rethinking retirement or putting it off all together! The Highlander ® offers exactly what John and Annie need to meet their retirement objectives: the potential to capitalize on a portion of the S&P 500 Index if it grows during the contract year, and the protection of not losing any of their account balance if the index should incur a loss in the contract year.
This is accomplished by the use of an index “Cap” strategy. Simply put, John and Annie will receive 100% of the index’s gains up to the designated cap rate for the contract year. If and when the index has a negative year, they will maintain the same account balance minus any rider fees associated with the contract.
We can see how this all changes in these two hypothetical examples. The examples start with $250,000.
Sequence of Returns During Accumulation Phase Hypothetical Annual Returns Hypothetical Account Value
Reversed Hypothetical Annual Returns
Reversed Hypothetical Account Value
17.31% 9.24% 5.20%
$293,275 $320,374 $337,033 $385,397 $433,456 $362,630
-9.17%
$227,075 $196,034 $198,876 $182,032 $152,288
-13.67%
1.45%
14.35% 12.47% -16.34%
-8.47%
-16.34% 12.47% 14.35%
$171,278
-8.47%
$331,915
$195,856 $206,041 $225,079 $264,040
Negative Market Sample
Positive Market Sample
1.45%
$336,728 $290,697 $264,040
5.20% 9.24% 17.31%
-13.67%
-9.17%
Sequence of Returns During Distribution Phase Hypothetical Annual Returns Hypothetical Account Value Withdrawal of $15,000 per Year
Reversed Hypothetical Annual Returns
Reversed Hypothetical Account Value
17.31% 9.24% 5.20%
$278,275
$15,000 $15,000 $15,000 $15,000 $15,000 $15,000 $15,000 $15,000 $15,000 $15,000
-9.17%
$212,075
$288,988 $289,015 $315,489 $339,830 $269,302 $231,492 $219,849 $174,795 $143,767
-13.67%
$168,084 $155,522 $127,349 $91,540 $87,955 $85,577 $75,027 $66,959 $63,550
1.45%
14.35% 12.47% -16.34%
-8.47%
-16.34% 12.47% 14.35%
-8.47%
1.45%
5.20% 9.24% 17.31%
Account Balance
Cap Rate
-13.67%
-9.17%
These two hypothetical examples illustrate sequence of returns and do not represent the past or future performance of any product. Actual results will vary.
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Highlander ® Fixed Index Annuity
Clear Spring Life and Annuity Company
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