Grow Your Savings with
Protection from Market Losses
A Fixed Indexed Annuity (FIA) allows your money to earn interest credits based on an external market index while protecting it from direct market losses.
With an FIA, your principal is shielded from stock market declines, and your interest may grow based on an external index.
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The Problem: – Is Your Retirement Savings at Risk?
Retirement savings should be safe and growing, but the reality is:
The stock market is unpredictable –
A downturn could reduce your available savings, an issue that leads many to consider the principal protection offered by a Fixed Indexed Annuity.
Bank rates are too low –
CDs and savings accounts may not keep up with
inflation.
Taxes eat into your growth –
Traditional investments may trigger yearly tax liabilities.
The Solution: – Growth & Protection with a Fixed Indexed Annuity
A Balance of Growth Potential & Principal Protection
A Fixed Indexed Annuity (FIA) is an annuity contract issued by an insurance company that:
Offers the potential for growth
through interest credits tied to a market index.
Provides protection from market downturns
your principal will not decrease due
to negative index performance.
Accumulates on a tax-deferred basis,
meaning taxes on earnings are delayed until withdrawal.
May include optional lifetime income benefits
(available for an additional cost).
How an Fixed Indexed Annuity Works: A 3-Step Plan
Enjoying the benefits of a Indexed Annuity is simple.
Step 1: Choose the Index Strategy for Your FIA
Select an external market index
(e.g., S&P 500) to determine
potential interest credits.
Step 2: Earn Interest Credits with No Direct Market Losses
If the index performs well, you may
receive interest credits (subject to
caps, participation rates, or
spreads).
If the index declines, you won’t lose
money due to market fluctuations.
Step 3: Decide on Your Withdrawal Strategy
Withdraw funds as needed
(subject to contract terms) or
convert to a guaranteed lifetime
income stream.
The Risks – of Inaction for Your Retirement Funds
If you don’t use a FIA, and instead leave your money in a high-risk or low-interest account, you could:
Lose savings in a market downturn
(for risk-based investments).
Miss out on tax-deferred growth opportunities.
Have uncertainty in retirement income planning.
Common Questions About Fixed Indexed Annuities (FIAs)
We’ve answered the most frequent questions about Fixed Indexed Annuities below, but if we haven’t answered your question, fill out the form below and get your questions answered by an expert for FREE!
Can I lose money with an FIA?
Your principal in a Fixed Indexed Annuity is protected from market losses by the insurance company. If the index goes down, you simply receive a 0% interest credit for that period, but your principal and previously credited interest do not decrease. However, it’s important to understand surrender charges, which are fees applied if you withdraw more than the allowed amount during the surrender period (typically the first 7-10 years of the contract). Additionally, optional riders for enhanced benefits may come with a fee.
How are FIAs taxed?
Fixed Indexed Annuities grow on a tax-deferred basis. This means you do not pay any taxes on the interest you earn each year. Taxes are only due when you begin to withdraw money. This allows your earnings to compound more efficiently over time compared to a taxable investment like a CD. When withdrawn, the earnings portion is taxed as ordinary income. We recommend consulting with a tax professional regarding your specific situation.
Are there fees or charges with an FIA?
Many basic Fixed Indexed Annuities have no annual fees. The primary costs to be aware of are:
- Surrender charges if you withdraw funds before the contract period ends.
- Optional rider fees: Some FIAs offer optional riders, such as a Guaranteed Lifetime Withdrawal Benefit (GLWB), which provide additional features for a fee, typically around 1% of the contract value annually.
All potential fees and charges are disclosed in the annuity contract.
How does an FIA earn interest?
An FIA earns interest credits based on the performance of an external market index, like the S&P 500. The insurance company uses participation rates, caps, or spreads to calculate how much interest is credited to your account.
- Participation rates (percentage of the index’s gain credited to your annuity).
- Caps (maximum interest credited) For example, a “cap rate” of 8% means the maximum interest you can be credited in a term is 8%, even if the index gained 20%. If the index is negative, you receive 0% and your principal is safe. This method allows you to participate in some of the market’s upside without any of the downside risk.
- Spreads (percentage subtracted from gains before applying participation rates).
Your principal in a Fixed Indexed Annuity is protected from market losses by the insurance company. If the index goes down, you simply receive a 0% interest credit for that period, but your principal and previously credited interest do not decrease. However, it’s important to understand surrender charges, which are fees applied if you withdraw more than the allowed amount during the surrender period (typically the first 7-10 years of the contract). Additionally, optional riders for enhanced benefits may come with a fee.
Fixed Indexed Annuities grow on a tax-deferred basis. This means you do not pay any taxes on the interest you earn each year. Taxes are only due when you begin to withdraw money. This allows your earnings to compound more efficiently over time compared to a taxable investment like a CD. When withdrawn, the earnings portion is taxed as ordinary income. We recommend consulting with a tax professional regarding your specific situation.
Many basic Fixed Indexed Annuities have no annual fees. The primary costs to be aware of are:
- Surrender charges if you withdraw funds before the contract period ends.
- Optional rider fees: Some FIAs offer optional riders, such as a Guaranteed Lifetime Withdrawal Benefit (GLWB), which provide additional features for a fee, typically around 1% of the contract value annually.
All potential fees and charges are disclosed in the annuity contract.
An FIA earns interest credits based on the performance of an external market index, like the S&P 500. The insurance company uses participation rates, caps, or spreads to calculate how much interest is credited to your account.
- Participation rates (percentage of the index’s gain credited to your annuity).
- Caps (maximum interest credited) For example, a “cap rate” of 8% means the maximum interest you can be credited in a term is 8%, even if the index gained 20%. If the index is negative, you receive 0% and your principal is safe. This method allows you to participate in some of the market’s upside without any of the downside risk.
- Spreads (percentage subtracted from gains before applying participation rates).
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