Fixed Indexed Annuities (FIAs)
A Fixed Indexed Annuity (FIA) is available for individuals who want the potential for growth linked to the market without putting their principal at risk. It combines the stability of a traditional fixed annuity with the opportunity to earn interest based on the performance of a market index, such as the S&P 500®. FIAs are commonly used by people approaching or already in retirement who are looking for predictable outcomes, protection from market downturns, and the option to create guaranteed income later in life.
How a Fixed Indexed Annuity Works
When you purchase a Fixed Indexed Annuity, your premium is placed into an annuity contract issued by an insurance company. While interest is tied to the performance of a market index, your money is not directly invested in the stock market. Instead, interest is credited based on how the selected index performs over a defined period. If the index increases, your annuity may earn interest subject to contract features such as caps, spreads, or participation rates. If the index declines, your account value does not decrease due to market performance, and previously credited interest is protected. This structure allows for:
• Upside potential during positive market years
• Protection during negative market years
• Predictable, rule-based outcomes established in advance
Key Benefits
Principal Protection: Your initial investment is protected from market losses. Even during periods of market decline, your account value will not decrease due to index performance.
Growth Potential Without Market Risk: Because interest is linked to a market index—but not directly invested—you can benefit from market gains without being exposed to market volatility.
Guaranteed Lifetime Income Options: Many Fixed Indexed Annuities offer optional income riders that can provide guaranteed income for life, regardless of how long you live or how the market performs.
Tax-Deferred Growth: Interest earned within the annuity grows on a tax-deferred basis, meaning taxes are not owed until withdrawals are taken.
Death Benefit Protection: Any remaining account value generally passes directly to your beneficiaries, often avoiding probate.
Fees, Withdrawals & Surrender Charges
Fixed Indexed Annuities typically include a surrender period, which commonly ranges from five to seven years but can vary. During this time, withdrawals above the contract’s free withdrawal amount may be subject to surrender charges. Most contracts allow you to withdraw up to 10% of your account value each year without penalty, even during the surrender period. This provides access to funds while still maintaining long-term guarantees. Optional riders, such as guaranteed lifetime income, may involve an additional cost. These fees are clearly disclosed in the contract and apply only if the rider is elected.