The Best of Both Worlds: Growth Potential with Principal Protection
A fixed indexed annuity (FIA) is an insurance contract that offers interest crediting linked to the performance of a stock market index — most commonly the S&P 500 — while guaranteeing that your principal is never at risk from market losses.
This makes FIAs uniquely attractive for retirees who want more growth potential than a traditional fixed annuity or CD, but cannot afford to lose their retirement savings in a market downturn.
"With a fixed indexed annuity, you participate in market gains when the market goes up — and you keep every dollar when the market goes down."
How Interest Is Credited
Fixed indexed annuities use several methods to calculate interest credits:
Key Benefits of Fixed Indexed Annuities
Frequently Asked Questions
What is a fixed indexed annuity (FIA)?
A fixed indexed annuity is an insurance product that credits interest based on the performance of a market index (such as the S&P 500), while guaranteeing that you will never lose principal due to market downturns. Your floor is always 0% — you can never receive negative interest.
How does the indexing strategy work?
Each year, the insurance company measures the change in your chosen index. If the index goes up, you receive a portion of that gain (subject to a cap, spread, or participation rate). If the index goes down, you receive 0% — your principal is protected.
What is a participation rate?
A participation rate determines what percentage of the index gain you receive. For example, a 70% participation rate on a 10% index gain would credit you with 7% interest.
What is a cap rate?
A cap rate is the maximum interest you can earn in a given period. For example, a 10% cap means even if the index gains 20%, you receive a maximum of 10%.
Are fixed indexed annuities safe?
Yes. Your principal is guaranteed by the insurance company and protected by state guaranty associations. You cannot lose money due to market performance — the worst you can receive is 0% interest in a down year.