Breaking Down a Fixed Indexed Annuity Word-By-Word
In previous blogs, Annuity Alliance has shared a lot of information about a fixed indexed annuity including why consumers have chosen to use this financial product for their retirement planning. For this week, our team is going to break down the entire statement word-by-word for you!
- “Fixed”: In the annuity world, there are many different types of annuities – fixed, fixed indexed, variable, and deferred. When an annuity is “fixed,” that means the product provides a guaranteed rate of return regardless of the economic conditions. Your premium is not at risk as the insurance company that you purchase the annuity from assumes the risk.
- “Indexed”: While a “fixed annuity” guarantees a rate of return, a “fixed indexed annuity” is typically tied into a certain index as a benchmark to credit interest. Some of the more popular indexes include the S&P 500, Dow Jones, Barclays, or other indexes. As a reminder, you place money into the annuity – you are not actually placing the money into the stock market directly. Your fixed indexed annuity is protected against market volatility as the insurance company retains the risk.
- “Annuity”: An annuity is a contract between you and an insurance company that says you will pay for the annuity in either a single lump sum or multiple payments over time. In return, the insurance company promises to make payments from the annuity to you in a single or series of payments.
What happens when you put all of these words together as a “fixed indexed annuity?” You have a contract with an insurance carrier that guarantees lifetime income that accumulates interest through a specific equity index.
Annuity Alliance hopes this breaks down the benefits of a fixed indexed annuity for you. When talking to one of our team members, ask about potential options and top-rated carriers available to purchase a FIA that aligns with your retirement strategy.