Fixed Index Annuities
A Fixed Index Annuity (FIA) is a powerful retirement tool that offers the potential for growth—without exposing your principal to market risk.
FIAs are tied to the performance of an external market index, such as the S&P 500® or the NASDAQ-100®. Your interest earnings are based on how these indexes perform, but unlike direct market investments, your principal is protected from losses if the market goes down.
Many FIAs also offer a fixed account option that earns a guaranteed interest rate, giving you flexibility and peace of mind. And when you’re ready, your FIA can turn your retirement savings into dependable, lifelong income.
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FIAs stand on three core pillars—just like a triangle, one of the strongest and most stable shapes in the world. These pillars form the foundation of what makes FIAs a powerful and resilient retirement solution.
Length
This refers to the contract duration, typically ranging from 3 to 10+ years. Longer terms may offer higher potential rates or bonuses, while shorter terms can provide greater flexibility.
Index Type
FIAs earn interest based on the performance of market indices like the S&P 500®, Nasdaq-100®, or other proprietary indices. The type of index selected can influence the growth opportunity and risk profile.
Crediting Methods
These define how interest is calculated and applied to the contract. Common methods include point-to-point and monthly average, each offering different strategies for capturing index gains while ensuring principal protection.
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Cap Rates
A cap rate is the maximum amount of interest your annuity can earn in a given period. If the market does really well, you’ll earn interest—but only up to the cap. And if the market goes down, your annuity won’t lose value.
Example:
Let’s say your cap rate is 8%. If the market goes up 10%, your annuity earns 8%. If the market goes down, you don’t earn interest that year, but your money stays safe.
Participation Rates
A participation rate tells you how much of the market’s gain your annuity gets. It’s a percentage of how much the index goes up.
Example:
If your participation rate is 60% and the market goes up 10%, your annuity earns 6% (because 60% of 10% is 6%).
Cap Rate | Index Gain | Total Earnings |
|---|---|---|
8% | 12% | 8% |
8% | 8% | 8% |
8% | 2% | 2% |
8% | -5% | 0% |
Participation Rate | Index Gain | Total Earnings |
|---|---|---|
60% | 12% | 7.2% |
60% | 8% | 4.8% |
60% | 2% | 1.2% |
60% | -5% | 0.0% |