Fixed Index Annuity
Guaranteed Income You Cannot Outlive
A fixed index annuity is a retirement contract that can provide a steady income stream you cannot outlive, with growth potential linked to a market index and the security of knowing your principal is protected from market losses.
The Basics
What Is a Fixed Index Annuity?
A fixed index annuity (FIA) is an insurance contract between you and an insurance company. You make a lump-sum payment or series of payments. In return, the insurer provides growth potential linked to a stock market index (like the S&P 500) with the guarantee that you will never lose your principal due to market downturns.
At retirement, you can convert your accumulated value into a guaranteed income stream that lasts as long as you live.
Key Features
Key Benefits
Why People Choose Fixed Index Annuities
Principal Protection
Unlike direct market investments, your principal is protected from market losses. Your account value will not decrease due to index performance.
Growth Potential
When the linked index rises, your account has an opportunity to grow at a predetermined cap or participation rate, allowing you to benefit from market gains.
Guaranteed Lifetime Income
Through an income rider, you can convert your FIA value into an income stream guaranteed to last your lifetime regardless of how long you live or market conditions.
Tax-Deferred Growth
Your money grows tax-deferred until you take distributions, allowing for potentially greater accumulation over time compared to taxable accounts.
Is This Right for You?
Who Fixed Index Annuities Are For
Pre-retirees in their 50s and 60s
People who want growth without market risk
Those concerned about outliving their savings
People rolling over IRAs or 401(k)s
Conservative investors seeking predictability
Retirees needing supplemental income
Simple Process
How a Fixed Index Annuity Works
01
Choose Your Contribution
Decide how much you want to place into the annuity, whether a lump sum or series of payments.
02
Select Your Index Strategy
Choose how your account growth is linked to a market index, with options like cap rates or participation rates.
03
Accumulation Phase
Your money grows tax-deferred with potential index-linked credits and protection from market downturns.
04
Income Phase
At retirement, activate your income stream for guaranteed payments that last as long as you live.
How It Compares
FIA vs. Other Retirement Options
A factual comparison to help you understand where a fixed index annuity fits in a retirement plan.
Feature
FIA
CDs
Stock Market
Variable Annuity
Market Risk
None on principal
None
Full market risk
Full market risk
Growth Potential
Index-linked (capped)
Fixed rate
Unlimited
Sub-account performance
Income Guarantee
Yes (with rider)
No
No
Yes (with rider)
Principal Protection
Yes
Yes (FDIC limits)
No
No
Liquidity
Limited during surrender
Limited during term
High
Limited during surrender
Every situation is different. A licensed advisor can help you determine which options best fit your retirement goals.
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Common Questions
Frequently Asked Questions
Is my money locked up?
Most FIAs have a surrender charge period (typically 5 to 10 years) during which withdrawals above a free withdrawal amount may incur charges. After the surrender period, full access is typically available. Many policies also allow penalty-free withdrawals of 10% per year.
How is index-linked growth calculated?
Your growth is determined by a cap rate, participation rate, or spread. For example, a 5% cap means if the index rises 10%, your account credits 5%. If the index falls, you credit 0%, not a negative number, so your principal is protected.
Are fixed index annuities FDIC insured?
No. They are backed by the financial strength of the issuing insurance company, which is regulated and required to maintain reserves. Most states also have guaranty associations that provide a layer of protection up to certain limits.
What is an income rider?
An optional feature (often available for a fee) that guarantees a specific income stream in retirement regardless of your actual account value or market performance. It provides certainty about how much income you will receive each month.
What is the minimum investment?
Minimums vary by carrier, commonly starting at $10,000 to $25,000 for lump-sum contributions. An advisor can help you identify carriers that fit your available assets.
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