A Different Kind of Retirement Tool
A fixed indexed annuity (FIA) is an insurance contract, not a security or a market investment. It’s designed to convert a lump sum into either principal-protected growth or a guaranteed income stream, with returns linked in part to the performance of a market index — but without directly investing your principal in that index. Fixed indexed annuities are insurance products, not securities. Guarantees are backed by the financial strength of the issuing insurance company.
How the “Indexed” Part Works
Your FIA’s growth is typically calculated using a formula tied to a market index like the S&P 500, subject to a cap, participation rate, or spread set by the insurance company. If the index goes up, your account can be credited growth up to whatever limit your contract specifies. If the index goes down, your principal is generally protected from that decline — you don’t lose money due to market downturns the way you could with a direct market investment, though you also don’t capture the full upside.
Why Pre-Retirees Consider FIAs
For someone within a decade of retirement, protecting accumulated savings from a market downturn right before you need to start drawing on it can matter more than chasing maximum growth. An FIA can offer a way to keep some retirement savings growing with downside protection, often alongside optional income riders that convert the contract into a guaranteed income stream later.
What to Understand Before Considering One
- Surrender periods. Most FIAs have a surrender charge period — often 5 to 10 years — during which withdrawing more than a set percentage can trigger a penalty. This makes FIAs generally unsuitable for money you might need access to soon.
- Caps and participation rates aren’t fixed forever. Insurance companies can adjust these annually within the terms of your contract, which affects how much upside you actually capture in a given year.
- Riders cost money. Optional features like guaranteed income riders typically come with an additional annual cost, which reduces overall growth in exchange for the added guarantee.
- It’s a long-term commitment. FIAs are generally best suited to money you’re comfortable committing for a decade or more, not a short-term savings vehicle.
Is an FIA Right for You?
The right fit depends on your full financial picture — how much you can commit long-term, what other retirement income sources you have, and how much you value principal protection versus maximum growth potential.
Have questions? Schedule a free review with Kayla Price, a licensed insurance agent at Price Services Group. Call 866-648-1578 or visit priceservicesgroup.com/schedule.
Price Services Group, LLC is not affiliated with or endorsed by the U.S. government or the federal Medicare program. NPN: 18530055 | Agency NPN: 20387435