Protect What You’ve Built. Prepare for What’s Next.
Fixed and fixed indexed annuities are insurance products designed to provide options for protecting principal, accumulating money for the future, and creating retirement income. Understanding how they work—including their guarantees, limitations, liquidity rules, and surrender periods—is important before deciding whether an annuity fits your goals.
Schedule an Annuity Education SessionWhat Is an Annuity?
An annuity is a contract issued by an insurance company. Depending on the contract, it can be used to accumulate money for the future, provide retirement income, or both. You pay the insurance company a premium, and the contract explains how interest may be credited and what income or withdrawal options are available.
Different types of annuities work differently. This page focuses on fixed annuities and fixed indexed annuities, both of which are insurance products. The right choice, if any, depends on your circumstances, goals, and need for access to your money.
Fixed Annuities
A fixed annuity generally provides a stated interest rate for a specified period, according to the contract. This can make interest crediting more predictable during that period. The rate and terms after that period depend on the contract.
Depending on the product, features may include principal protection, tax-deferred accumulation, options for future income, and beneficiary provisions. Not every fixed annuity has the same features or terms. Withdrawals, surrender charges, or other contract provisions can reduce the amount you receive.
Any guarantees are subject to the terms of the contract and backed by the claims-paying ability of the issuing insurance company.
Fixed Indexed Annuities
A fixed indexed annuity (FIA) is an insurance product where interest crediting may be linked in part to the performance of an external market index over a specified period. The annuity is not directly invested in the index or the stock market.
The amount of interest credited depends on the contract’s method. A cap may limit credited interest, a participation rate may determine how much of an index’s change is used, and a spread may reduce the amount used in the calculation. A positive index result does not mean the annuity receives the full index return, and some periods may earn no index-linked interest.
A floor may prevent a negative index-crediting result for a period, but charges, withdrawals, and other contract adjustments can still reduce the value or amount received. Principal protection and other guarantees depend on contract terms and the issuing insurer’s claims-paying ability.
Important Things to Consider
Access to your money: Annuities are generally designed for longer-term goals. Many contracts allow some withdrawals, but taking more than the permitted amount during a surrender period can result in charges. A market value adjustment, where applicable, may also change the amount received. Rules vary by contract.
Income and beneficiaries: Some contracts offer options for future income or benefits for named beneficiaries. Features, costs, and payment choices vary; some income options may involve additional charges or require giving up access to a lump sum. Review the terms before choosing.
Taxes: Earnings generally accumulate tax-deferred, but withdrawals may be taxable and may also be subject to an additional federal tax if taken before age 59½. Tax treatment depends on your circumstances and how the annuity is funded. A qualified tax professional can help you understand your situation.
Fixed and fixed indexed annuities are not right for everyone. Consider your time horizon, liquidity needs, goals, and the specific contract before deciding whether one is suitable for you.
A Conversation About Your Goals
If you’d like to understand your options, James at Fountain Legacy Group can walk through how these insurance products work and help you consider whether one may fit your needs—without pressure.
Schedule an Annuity Education Session