What is a fixed indexed annuity?
A fixed indexed annuity is an insurance contract. Interest credited to the contract can be linked in part to the performance of a market index, subject to the specific terms of the contract. It is not the same as owning the stocks in that index.
Depending on the contract and a person’s needs, a fixed indexed annuity may be considered for principal-protection features, tax-deferred accumulation, or an optional income feature. Guarantees are subject to the claims-paying ability of the issuing insurance company.
The details that matter
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Crediting method. How is interest calculated?
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Caps and participation rates. How can they limit index-linked interest?
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Surrender period. How long do withdrawal charges apply?
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Liquidity. How much can you access without a surrender charge?
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Income features. Is an optional rider involved, and what does it cost?
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Carrier strength. Which insurance company stands behind the guarantees?
An index gain is not necessarily your annuity return.If the linked index rises by a certain percentage, an indexed annuity does not necessarily receive that same return. The contract’s crediting formula determines how interest is credited.
Bring the contract or illustration.
The headline is not the contract. MKT can help you slow down and identify the provisions, limitations, and questions that deserve attention before a decision is made.