RETIREMENT INCOME

FIXED INDEX ANNUITY

A fixed index annuity is a type of retirement savings product that provides a combination of growth potential and protection. Here’s a simple breakdown:

  1. What It Is: A fixed index annuity is a contract between you and an insurance company. You make a lump sum payment or a series of payments, and in return, the insurance company promises to provide you with income or a lump sum in the future, typically during retirement.

  2. How It Works:

    • Interest Based on an Index: The growth of your investment is linked to a stock market index, like the S&P 500. However, you don’t actually invest directly in the stock market. Instead, your annuity’s interest rate is tied to the performance of this index, which means your account can grow based on market performance, but with built-in protection against losses.

    • Protection from Losses: Even if the stock market index performs poorly, your principal (the amount you invested) is protected. You won’t lose money due to market downturns, making it a safer option compared to direct stock market investments.

    • Caps and Participation Rates: The insurance company may set limits on how much you can earn (a cap) or how much of the index’s growth you can participate in (a participation rate). This means you may not capture the full upside of the index’s performance but still benefit from potential growth.

  3. Benefits for Retirement:

    • Guaranteed Minimum Returns: You typically receive a guaranteed minimum return, which ensures that you’ll earn some interest even if the index performs poorly.

    • Tax-Deferred Growth: Your earnings grow tax-deferred, meaning you don’t pay taxes on the growth until you withdraw the funds.

    • Income Options: When you reach retirement, you can choose to receive regular income payments for a set period or for the rest of your life, depending on the options available in your annuity contract.

As a licensed agent, my job is to help you understand how a fixed index annuity can fit into your retirement plan, compare different products, and choose one that aligns with your financial goals and risk tolerance. I’m here to guide you through the process and ensure you make an informed decision.