What is a fixed index annuity?

A fixed index annuity is a type of annuity that provides the potential for income growth while protecting your principal investment from market declines. Your growth is generally capped at a percentage of the stock market. So let’s say the market goes up 20%. Your annuity growth might have a ceiling of 6% or it might be capped at 50% of the market gains. While that may seem like you’re leaving money on the table, the main goal of an annuity is the preservation of principal because when the market drops 20%, a fixed index annuity doesn’t lose out.

For many in 2008, that protection of principal right before their retirement years would have helped protect them from the 50% drop in the market. With that kind of market loss in mind, a 0% loss in your retirement account sounds better than a 20% gain in a bull year. If the stock market index goes up, your account value will go up. If the stock market index goes down, your account value will not go down.

Is an annuity a good option for retirement?

Specially designed for retirement, fixed index annuities help provide income that is steady and can last for the rest of your life, even if the stock market crashes. This makes them a retirement income planning tool that can provide added peace of mind. And because they’re linked to the market, but your funds are not directly invested, you won’t lose when the market drops, but you will still earn growth on your investments over the years when the market increases.

Is an annuity right for me? Find out today!

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