Fixed Index Annuities – Questions Answered

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About John Stevenson

John Stevenson, a prominent wealth protection educator, has been able to help thousands of people successfully strategize for retirement. With retirees living longer and retiring earlier, having a retirement income that cannot be outlived has been a growing concern for many seniors. His clients include teachers, business owners, executives, doctors, and entrepreneurs, to name a few. Not a single client has ever lost money due to market fluctuations. John is also an expert in structuring Tax-Free Retirement Accounts, which help his clients build wealth safely and enjoy an extremely low tax burden or even zero taxes in retirement. His services focus on assisting people to Retire On Purpose, not just leave it to chance.

Fixed index annuities (FIAs) are a relative newcomer to the annuity world; the first was developed in 1995. Since that time, though, they have become a popular option for savvy long-term planners looking to ensure a steady income during retirement. 

Read on to learn the answers to common questions about FIAs. 

What Is a Fixed Index Annuity? 

An FIA is an annuity where part of your return is tied to a basket of stocks or a particular index such as the NASDAQ or Dow Jones Industrial Average. 

The “fixed” means that you are guaranteed a specific rate of return, no matter how the index performs. There’s also a maximum rate of return that the annuity will not exceed. So, while you are insulated from a bear market, you don’t experience all the gains from a bull market. 

Though the “index” means that a stock index determines your gains, you are not directly investing in the stock market. An FIA will not be exposed to market risk. 

How About Variable Annuities? 

Variable annuities are investments sold by security-licensed advisors using a prospectus,  The actual investment is placed in “separate accounts” where rates of return is directly based on the returns of the specific category.    Unlike an FIA, you may be exposed to market risk.  

Which annuity is better?  It depends on how comfortable you are with market risk. Variable annuities may be a better choice for younger adults who have more time to weather the ups and downs of a securities investment. 

An FIA may offer a stable, guaranteed income for those approaching middle age while offering you the chance of some market upside. 

Your choice of product is based on your specific needs and goals. 

Does an FIA Guarantee Income? 

Yes. An FIA can guarantee minimum income payments for the beneficiary’s lifetime, and the chance that those payments may increase depends on index performance. 

What Do I Do If I’m Concerned About Inflation or Health Problems? 

Some FIAs may allow you to add a COLA (cost of living adjustment) rider or a rider for long-term care or terminal illness. This can help you customize your annuity to your needs. Riders generally come with fees and expenses; choosing the correct rider for your personal goals should involve an experienced advisor to help you. It is vital you understand the benefits and costs of adding any rider to your annuity. 

Are There Any Cons to an FIA? 

Because the insurance company assumes the risk for the FIA, these products should only be considered as a longer-term commitment. FIA (and most variable annuities) have surrender fees that will withhold a portion of your account should you change or quit the annuity prematurely.  

FIAs (and most variable annuities) do offer access to your account and allow withdrawals annually, generally 10% per year.  

How Can I Choose the FIA That’s Best For Me? 

The choice of an FIA or another annuity is one that can affect your retirement and long-term financial well-being. The market is bigger than ever these days, and it can take time to make sense of your options. Every financial decision has choices and options available, which is why it is smart to work with a licensed and authorized professional before making any final decision.

Many people have learned about the power of using the Safe Money approach to reduce volatility. Our Safe Money Guide is in its 20th edition and is available for free.  

It is an Instant Download.  Here is a link to download our guide: 

Safe Money Guide – Annuity.com

About John Stevenson

John Stevenson, a prominent wealth protection educator, has been able to help thousands of people successfully strategize for retirement. With retirees living longer and retiring earlier, having a retirement income that cannot be outlived has been a growing concern for many seniors. His clients include teachers, business owners, executives, doctors, and entrepreneurs, to name a few. Not a single client has ever lost money due to market fluctuations. John is also an expert in structuring Tax-Free Retirement Accounts, which help his clients build wealth safely and enjoy an extremely low tax burden or even zero taxes in retirement. His services focus on assisting people to Retire On Purpose, not just leave it to chance.

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Annuities are a safe and reliable investment. They can transform your savings into a more predictable income. Speak with one of our qualified financial professionals today to find out how an annuity can offer you guaranteed monthly income for life.

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Content in our posted articles is deemed to be accurate but topics, facts and laws can change. It is always a good idea to verify facts before making decisions. Always seek authorized and professional advice regarding financial decisions which includes investing, annuity purchases, tax planning, changes in a financial portfolio and retirement planning.

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