Is a fixed index annuity (FIA) right for you?

When it comes to saving for retirement, there are a lot of options out there. One option you may not have considered is a fixed index annuity.

What is a fixed index annuity?

It's an insurance product that provides you with the potential to earn interest based on the performance of a stock market index, without the risk of losing your principal investment. Sounds great so far, right? And there are more benefits: - Your interest is locked in, even if the market crashes - You can receive income payments for life, even if you live to be 100 or older.

There are a few things to keep in mind before investing in a fixed index annuity, though.

• You won't be able to access your money right away, as there is usually a 10-year decreasing surrender charge.
• Your interest rate may be lower than if you had invested directly in the stock market.

But if you're looking for a safe way to grow your retirement savings, a fixed index annuity may be a good option for you. Just get in touch with me and we can go over the details to see if it makes sense for your retirement savings goals.
 
If you're like many American workers, you have a 401k plan through a previous employer.

And while 401k's are a great way to save for retirement, they have their limitations. For example, you're limited in how much you can contribute each year, and you're at the mercy of the stock market.
 
That's where a fixed index annuity can help. A fixed index annuity is a retirement service that provides guaranteed income for life, no matter how long you live. And, unlike a 401k, there's no limit to how much you can contribute. So, if you're looking for a retirement solution that provides guaranteed income for life, a fixed index annuity may be right for you.

A fixed index annuity is a retirement service that offers former or current workers with a 401k plan the ability to receive a fixed, tax-deferred income stream during their retirement years. This retirement service also offers the potential for greater income growth than traditional fixed annuities, based on the performance of one or more stock market indexes.
 
The index chosen by the annuity provider will determine how the annuity’s value will fluctuate.

For example, if the S&P 500 is the index, and it goes up by 5%, your annuity value will also go up by 5%. The above example is for illustration purposes only, and certain indexes with give the account a higher rate of return while some will give a lower rate.  This a complex product and you should make sure you understand how interest is credited from year to year.  However, if the market index goes down, your annuity value will remain the same, minus fees and/or expenses for that year.
 
This stability makes fixed index annuities an attractive retirement service for those who are looking to protect their retirement savings from market volatility.

What are stock indexes?

Indexes are used in a fixed index annuity as a benchmark to calculate interest crediting potential. The most common indexes used in fixed index annuities are the S&P 500 Index, the Dow Jones Industrial Average, and the Nasdaq-100 Index. In order for an index to be eligible for use in a fixed index annuity, it must meet certain criteria established by the insurance company, including being publicly traded and having a sufficiently long history. The goal of using an index in a fixed index annuity is to provide potential interest crediting that is based on the movement of the underlying market, while at the same time limiting downside risk. When selecting an index for use in a fixed index annuity, it is important to consider both the past performance of the index and its expected future performance.

A stock index is a statistical measure of the changes in the value of a basket of selected stocks. It is a tool used by investors to track the performance of the overall stock market. The most commonly quoted stock indexes are the Dow Jones Industrial Average, the S&P 500, and the Nasdaq Composite.
 
There are two main types of stock indexes: price-weighted indexes and market-value weighted indexes. In a price-weighted index, each stock is given equal weight regardless of its share price. In a market-value weighted index, each stock is given a weight based on its market value (share price times number of shares outstanding).
 
Stock indexes can be used to measure the performance of a particular sector or industries within the overall stock market. For example, the S&P 500 index includes stocks from 500 large companies across 11 different sectors. The Dow Jones Transportation Average is an index that tracks the performance of 20 transportation stocks, including railroad operators and airlines.
 
Stock indexes can also be used to create investment products, such as mutual funds and exchange-traded funds (ETFs). These products allow investors to gain exposure to the underlying stocks in the index without having to purchase them individually. fixed index annuities are another type of investment product that track the performance of a stock index. fixed index annuities provide guaranteed income for life, making them an attractive option for retirees who want to protect their nest egg from market volatility.
 
Pros:

• You can participate in the market’s upside without worrying about the downside.
• Your principal is protected from losses.
• You can choose how long you want to participate in the market, which can give you greater control over your retirement income.

 Cons: 

• There is typically a 10-year decreasing surrender charge, which means you may have to pay a penalty if you withdraw your money early.
• You may not have access to your money as quickly as you would with other investments. Overall, a fixed index annuity can be a safe way to grow your money
• Unlike many stocks, indexes do not pay dividends which can influence your total return. You can choose how long you want to participate in the market, which can give you greater control over your retirement income.

However, there are also some drawbacks that you should be aware of:

• You may not have access to your money as quickly as you would with other investments.
• Before deciding, make sure you understand the possible risks and rewards.