Stability and Growth | Decoding Fixed Indexed Annuities
What is a Fixed Indexed Annuity (FIA)?
An FIA is a retirement savings product that provides stability and growth. It offers the potential for growth based on a stock market index while protecting your principal from market downturns.
How is an FIA different from a traditional annuity?
Unlike traditional annuities with fixed returns, FIAs tie their returns to a market index. This offers the potential for higher growth while safeguarding your principal investment.
What happens to my FIA if the stock market declines?
In an FIA, the principal remains protected even if the linked market index performs poorly. The guaranteed minimum interest rate ensures that market downturns do not result in lost investments.
Are there limits on the potential returns in an FIA?
Yes, FIAs usually have caps or participation rates that limit your maximum return, even if the linked index performs exceptionally well. This trade-off balances stability and growth for the principal protection feature.
Can I lose money in a Fixed Indexed Annuity?
The principal investment in an FIA is generally protected from market losses. However, early withdrawals might incur fees or surrender charges, potentially reducing your principal.
What are the tax benefits of an FIA?
Can an FIA be used for retirement income?
Are there fees associated with FIAs?
Is an FIA suitable for me?
An FIA may suit you if you want a balance between growth potential and principal protection, especially as you near retirement. Consider your financial goals, risk tolerance, and retirement plans to decide if an FIA is right for you.
Can I access my funds in an FIA before retirement?
Early access to FIA funds is possible, but surrender charges and tax penalties may apply to early withdrawals, especially before age 59½. FIAs work best as long-term retirement investments and offer stability and growth over time.