Is a Fixed Indexed Annuity Right for You?

Trent Bradshaw CFP®, AIF® & Brandon Rogers CFP®, AIF® |

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. Let's see if this is an option that might be worth looking into. 

A fixed index annuity earns interest based on changes in an external index with a guaranteed minimum rate set in the contract. The selected index varies from day to day and is not predictable. When you buy a fixed index annuity you own an insurance contract – you are not buying shares of any stock index. Guarantees are backed by the financial strength and claims-paying ability of the insurance company. This is meant for educational purposes only and should not be considered investment advice or a recommendation to take a particular course of action. Consult with a financial professional regarding your personal situation before making any financial decisions.

If you…

• have a retirement plan in place but want to add balance to the mix

• need your earnings to never fall below zero

• want growth potential, coupled with principal protection from market loss

• seek a guaranteed minimum rate of return that never varies, regardless of market swing

• are interested in an annuity where the insurance company assumes the risk

…then, a Fixed Index Annuity (FIA) might be right for you.


Questions to Ask Your Financial Professional

1. How can an FIA help me diversify my portfolio?

2. What are the pros and cons of an FIA?

3. How can you use FIAs in a Qualified Plan?

4. Can you tell me the key features I should know about FIAs?

5. How and when could I access the money in my annuity?

6. How is the interest of an FIA calculated and applied?

7. What are the terms and conditions for receiving payments from an FIA?

8. Which indexing method is used?

9. How does an FIA help me meet my overall financial objectives and time horizon?

10. Will my current income last as long as I do?

11. How will taxes impact my retirement income?

12. What annuity is right for me based on key differences (for example, FIAs vs. variable annuities)?

13. Do I lose the balance if I pass away before I’ve received all my payments?

14. How can I safely earn more yield?


Adapted from Indexed Annuity Leadership Council