Fixed Indexed Annuities: Potential Plus Protection

Fixed indexed annuities can help current retirees and pre-retirees accumulate money for retirement and provide a guaranteed income after you retire. A fixed index annuity may be a good choice if, you want the opportunity to earn indexed interest, but don’t want to risk losing money in the market.

As you near retirement, the possibility of a market downturn may become a greater concern. However, there is a way to achieve upside potential and downside protection. Also, a fixed-indexed annuity allows you to participate in positive market performance (up to a cap) and locks in gains– this means your account value is protected and will remain level, even when the market declines

What is a Fixed Indexed Annuity?

Fixed Indexed Annuities are a tax-deferred, long-term savings option that provides principal protection in a down market and opportunity for growth. It gives you more growth potential than a fixed annuity along with less risk and less potential return than a variable annuity.

Returns are based on the performance of an underlying index, such as the S&P 500® Composite Stock Price Index, a collection of 500 stocks intended to provide an opportunity for diversification and represent a broad segment of the market. While, the benchmark index does follow the market, as an investor, your money is never directly exposed to the stock market.

Accumulate for Retirement

FIAs offer the potential to earn interest based on changes in an external index. You have the choice of several indexes to choose from.

Protect Your Principle

Your contract can earn interest based on an external index, but you’re not actually buying any stocks or shares of an index. This means the money in your FIA (your “principal”) is not at risk due to market losses.

Growth Tax Deferred

You don’t pay taxes on the interest your annuity earns until you take the money out. This helps compound your interest, so the money in your contract can accumulate faster.

Get Flexibility

Some FIAs offer riders (either built in or at an additional cost) to help you address specific needs. They also offer a variety of crediting methods and flexible options for receiving income.

Receive Guaranteed Income

Annuities are designed to provide a reliable income stream of retirement income, either for a set period or for as long as you live.

Leave a Legacy

FIAs pay your loved ones a death benefit if you pass away before you start taking scheduled annuity payments. (And, if properly structured, the death benefit is not subject to probate.)

What’s this about a Lifetime “Paycheck”?

Certain FIAs give you the ability to grow a source of guaranteed income that you can’t outlive and may even continue to your spouse if you’re the first to pass. FIAs offer different options to help you achieve your income goals, whether you plan to retire in a year or two or retirement is still five years or more off.

How Does a Fixed Indexed Annuity Help a Pre-Retiree?

If you’re approaching the last step in your career, and you want to scale back in risk tolerance, a fixed index annuity might be a good way to grow your assets since you get to participate in a portion of the upside potential, but have protections from a stock market downturn.

If you’re looking to convert your retirement savings into a pension income type of solution, there are many annuity products with guaranteed income riders that will tell you today what your annuity income payments would be in 5, 10, 15, or 20 years. This could be a good foundation for your fixed retirement income planning, especially if you want to meet goals for retirement.

Key Takeaway

Fixed index annuities offer guaranteed income riders, a pre-retiree can create a retirement roadmap and solve for how much money needs to be saved going forward, starting today, to achieve their desired retirement income in the future, up to 30 years in advance.

How Does An Indexed Annuity Help a Retiree?

  • A fixed index annuity can be used to generate guaranteed annuity income payments that you can’t outlive.
  • A few products can help keep up with inflation to maintain your lifestyle.
  • Some annuity products can help plan for long term care, nursing homes, assisted living facilities, and home health care costs.
  • Others can enhance death benefits for Estate Planning as an alternative to life insurance.
  • Some annuities offer Return of Premium or Accumulating Penalty-Free Withdrawals for extra liquidity.
  • Finally, some fixed index annuities offer premium bonuses to help offset any losses.

Who Does Not Benefit from an Indexed Annuity?

  • A consumer seeking aggressive growth with all the upside.
  • An investor seeking short term commitments.
  • Someone wanting unlimited liquidity.

Turn Your Retirement Savings Into An Income Stream You Can’t Outlive.

Annuities are the only retirement plan that can provide guaranteed income for life….even if the annuity runs out of money. Less stress. More efficient. Retire comfortably. Take all the guesswork out of your retirement. The best part? It’s all at no cost to you.

Lifetime Income

A guaranteed lifetime withdrawal benefit provides a paycheck for a single lifetime or both spouse’s lifetime.


Your payments have the opportunity to increase each year to protect against inflation.

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Annuities are insurance products that can be important in your overall retirement portfolio. Fixed index annuities, also known as FIAs, are sold by licensed insurance professionals who can help you find the right approach to achieve your retirement goals.

Annuities are not as complicated as you may think. An annuity is simply a contract between you and an insurance company. In exchange for an initial, or in some cases, recurring payment, called a premium, the insurance company promises to make a series of payments to you either immediately (an immediate annuity), or at some point in the future (a deferred annuity).  

Some annuity products have certain age restrictions and some don’t. But, there is an important age to remember concerning annuities. Generally, and subject to certain exceptions, if you withdraw money from an annuity before you reach age 59½, you may have to pay an additional 10 percent tax on your funds.

Many people purchase annuities closer to their retirement age to avoid incurring this financial cost. Consult a financial professional if you have questions about age requirements.

The return for FIA funds is tied to the performance of a stock market index (e.g., S&P 500, NASDAQ, etc.). The principal is protected against loss, but there is potential for gain depending on the index performance. FIA funds typically have rate floors and caps, meaning that the growth will rise and fall within certain parameters.

This depends on the type of annuity you have. Are you hoping to receive payments right away or still saving for the future? If you purchase an immediate annuity, you will begin receiving regular annuity payments within the first contract year.

If you purchase a deferred annuity, typically your annuity payments won’t begin until sometime after the first contract year. With a deferred annuity, you still typically have access to money at any time, but you may have to pay applicable surrender charges if you withdraw money within the surrender charge period. 

Some annuities allow you to withdraw a specified percentage each year without incurring a surrender charge. This penalty-free amount differs by product and by insurance company.

Again, if you withdraw funds from a deferred annuity before you reach age 59½, you may have to pay an additional tax on those funds. You should consult a tax professional for additional information on the tax consequences of withdrawing funds from an annuity at any age.

This is the amount of time the specific product uses to lock in gains and reset to the new starting point in the index. This time varies from product to product.

This is how long the product will have early withdrawal charges. If this period does not match the time period of the claimant’s structure, the product should not be used. Surrender charges do not apply when using an income rider.

The FIA provides guarantee of principal and market-indexed gains based on a strategy unique to each indexed annuity.

Upon receipt of the funding amount, the assignment company immediately sends funds via wire transfer to the insurance company in the United States to purchase the annuity contract.

All annuities are regulated at the state level by each state’s insurance commissioners.

Every retirement is different, and your goals for your golden years will be different than the person next to you.

When choosing the right product, you will have to consider when you want your payments to begin, risk factors, potential market volatility for certain products and tax requirements.

When researching annuities, it’s about how you want to secure a financially independent future in retirement with products designed to protect assets while allowing for growth opportunities and reliable income streams. It is important to remember annuities are backed by the insurer that issues the contract and are regulated by state law. 

There is a lot to consider when it comes to planning for your retirement.

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