What are the benefits of a fixed indexed annuity?

A fixed indexed annuity is a tax-deferred, long-term savings option that provides principal protection in a down market and opportunity for growth. It gives you more growth potential than a fixed annuity along with less risk and less potential return than a variable annuity.

What are the pros and cons of fixed index annuities?

The advantages of indexed annuities include the potential to earn more interest and the premium protection they offer. The disadvantages include higher fees and commissions and caps on gains.

Can you lose money in a fixed index annuity?

Unlike index funds, fixed index annuities are generally protected against loss of principal. This means you won’t lose any of the money you put into a fixed index annuity.

What are the downside of indexed annuities?

Like all investments, index annuities have their disadvantages. Administration Fees Like mutual funds, some index annuities charge a 1-3\% annual management fee. Withdrawal Fees Withdrawals exceeding the annual allowance incur an insurance company penalty. Vesting Schedule Earnings diminish when withdrawn early.

How does an FIA work?

A Fixed Index Annuity (FIA) is a contract between you and a life insurance company. You pay a premium to the insurance agency in return for regular income payments over a period of time, beginning at some point in the future. Over the years, annuities have gotten a bad rap in the investment world.

Are FIA good investment?

At what rates will bonds appreciate? Ibbotson reached a favorable conclusion about FIAs upon calculating the return of a simulated FIA from 1927 through 2016. He found that it outperformed bonds by a half an annualized percentage point over that 90-year period with similar volatility and better downside protection.

Why do financial advisors push annuities?

Annuities are costly because they are insurance-based products that have to make up the cost of what they are guaranteeing you. For younger investors, the annuity is pushed as a tax deferral investment program. A variable annuity will give you that at a cost.

How does a fixed indexed annuity really work?

How a Fixed Indexed Annuity Really Works Income Benefit. First, let’s compare the income benefit available. Market Upside. Next, let’s look at the growth of the assets. Value and Liquidity. And lastly, let’s take a look at how the fixed indexed annuity accumulation value compares to the market portfolio.

What do you need to know about fixed indexed annuities?

Guaranteed lifetime income: You can select from 6 or more income options. All of them are guaranteed.

Tax-deferred growth: Unlike CDs and savings accounts,the growth in a fixed index annuity is not taxed until you begin to take income or other distributions.

Creditor protection: Most states offer annuities some form of creditor protection.

How safe is your fixed indexed annuity?

Unlike index funds, fixed index annuities are generally protected against loss of principal. This means you won’t lose any of the money you put into a fixed index annuity. This protection against losses, however, comes at a cost. You won’t receive the exact return of the market index.

Why is an equity indexed considered to be a fixed annuity?

Founder, DenverWest Insurance Professionals, Inc., An Equity Indexed Annuity is considered a Fixed Annuity because: 1/ crediting is not directly in the market but rather through Options purchased on the different indices used.