Fixed Indexed Annuities

Fixed Indexed Annuities (FIAs) offer a unique combination of growth potential and downside protection, making them popular for retirement planning. How FIAs Work FIAs credit interest based on the performance of a market index (like the S&P 500) while protecting your principal from market losses. Index Gains: When the index rises, you earn interest (up to a cap or with a participation rate) Index Losses: When the index falls, your account value doesn't decrease (0% floor) Guaranteed Minimum: Most FIAs guarantee a minimum return over the contract term Crediting Methods Annual Point-to-Point Measures index change from one anniversary to the next. Simple and popular. Monthly Sum / Monthly Average Uses monthly index values. Can provide more consistent returns but often with lower caps. Performance Trigger Credits a fixed rate if the index is positive, regardless of how much it gained. Key Terms Cap Rate: Maximum interest you can earn (e.g., 6% cap means you earn up to 6%) Participation Rate: Percentage of index gain credited (e.g., 50% of S&P 500 return) Spread/Margin: Percentage subtracted from index gain before crediting Floor: Minimum interest rate (typically 0%) Income Riders Many FIAs offer optional Guaranteed Lifetime Withdrawal Benefits (GLWBs) for additional cost. These riders provide: Guaranteed income for life, regardless of account value Income base that often grows at a guaranteed rate Flexibility to start income when needed Suitability Considerations FIAs may be appropriate for clients who: Want growth potential without direct market risk Are 5-10+ years from needing the funds Prioritize principal protection May want guaranteed lifetime income in the future