What are fixed index annuities
Fixed index annuities (FIAs) are financial products that combine elements of fixed annuities with the potential for growth linked to the performance of a specific market index (e.g. S&P 500) with potential on the upside but never the downside. They offer a balance between the protection of your principal and the potential for higher returns.
What you get with a typical fixed index annuity
Fixed index annuities can be complex products, and it's important to carefully review the terms, features, and limitations of each specific annuity contract. We can assist you to determine if a fixed index annuity aligns with your financial goals and risk tolerance.
Principal Protection
FIAs provide a guaranteed minimum interest rate or floor, ensuring that your principal investment is protected from market downturns. Even if the underlying index performs poorly, your principal remains intact.
Index-linked Growth Potential
The interest credited to your fixed index annuity is tied to the performance of the chosen market index. If the index increases in value, your annuity can earn interest based on a portion of that growth. However, it's important to note that there are typically caps or participation rates that limit the maximum return.
Tax-Deferred Growth
Like other types of annuities, fixed index annuities offer tax-deferred growth. The earnings on your annuity accumulate without being subject to income taxes until you withdraw them.
Choice of Crediting Methods
Insurance companies typically offer various crediting methods to calculate the interest credited to your FIA. Common methods include annual point-to-point, monthly averaging, and monthly cap.
Guaranteed Rate Options
Fixed index annuities also provide the option to convert the accumulated value into a steady stream of income, either for a specific period or for the rest of your life. This ensures a predictable income source during retirement.
Access to Account Value
While fixed index annuities are designed for long-term savings and retirement income, they usually offer some liquidity options. These can include penalty-free withdrawals up to a certain percentage of the account value or annuitization for a guaranteed rate of return.
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