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.
Retirement savings should be safe and growing, but the reality is:
A downturn could reduce your available savings, an issue that leads many to consider the principal protection offered by a Fixed Indexed Annuity.
CDs and savings accounts may not keep up with inflation.
Traditional investments may trigger yearly tax liabilities.
A Balance of Growth Potential & Principal Protection
A Fixed Indexed Annuity (FIA) is an annuity contract issued by an insurance company that:
through interest credits tied to a market index.
your principal will not decrease due to negative index performance.
meaning taxes on earnings are delayed until withdrawal.
(available for an additional cost).
Select an external market index
(e.g., S&P 500) to determine
potential interest credits.
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.
Withdraw funds as needed
(subject to contract terms) or
convert to a guaranteed lifetime
income stream.
If you don’t use a FIA, and instead leave your money in a high-risk or low-interest account, you could:
(for risk-based investments).
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 When withdrawn, the earnings portion is taxed as ordinary income.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:
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.
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