What is a Fixed Indexed Annuity (FIA)?

A fixed indexed annuity (FIA), like any annuity, is a contract between you (the client) and an insurance company. Most are what’s called deferred annuities, which means they provide tax-deferred growth potential.

 Like Social Security or a pension, FIAs can also provide you the opportunity to take lifetime income during retirement. Put another way, an FIA can guarantee a stream of income for as long as you live (assuming no excess withdrawals are taken over the life of the contract).

 Think of it like longevity insurance.

What are the different types of FIAs?

There are a couple reasons to consider an FIA, and from a high level, each of the FIAs fall into one of these categories:

  • Accumulation
  • Income
  • A hybrid that does both

Additional benefits might include additional liquidity features, allowing you access to your money earlier in the contract or to all of it at any time in the event of certain emergencies. Other benefits can enhance the death benefit conveyed to your heirs if you were to pass away while the FIA still has remaining account value.

Taking the time to review the benefits associated with FIAs can help you build a retirement portfolio that meets your financial goals and provide long-term growth potential, a lifetime income stream and an enhanced legacy.

With FIAs, you are able to manage how much income and risk you are comfortable with. If outliving your retirement savings is one of your concerns, FIAs could be the answer you have been searching for.

Is this an insurance product?

Earlier, we mentioned FIAs are contracts between you and an insurance carrier. That’s because FIAs are insurance products.

In an FIA, you are not invested directly in the market, and your premium is always 100% protected from market losses. No matter what the market does, at the end of the contract, you’ll get back what you put in (minus any early withdrawals).

Add-ons to further enhance your FIA’s value

Add-ons, called benefit riders, are provisions added to the base FIA contract that can increase its growth potential, enhance the income the FIA provides or strengthen the legacy you could leave to your beneficiaries upon death.

The benefits take the form of higher rates of return on interest credits, higher payout percentages or enhanced death benefits.

Depending upon the insurance carrier, the charges are associated with most FIA products that include these additional benefits. All of these riders are embedded, often included at no additional cost.

Choosing one FIA over the other

Talk to a financial professional to determine what product and which riders might make the most sense for you based on:

  • Your financial goals and objectives
  • Other financial vehicles you may already have in your retirement portfolio
  • Your life stages, whether you’re still saving for retirement, approaching retirement age, or retired and already drawing a retirement income

Not working with a financial professional currently? Contact us to see if an FIA is right for you.