What Is a Fixed Index Annuity?
A fixed index annuity, or FIA, earns interest based on the market performance of an index, like the S&P 500®. Tying the interest rate to an index lets the funds experience market gains. At the same time, the funds are protected from downturns.
Many FIAs use indexes that manage volatility since they help to minimize the impact of unpredictable market fluctuations. Volatility refers to how much an index value goes up and down. Managed-volatility indexes use strategies to control these ups and downs, helping to manage risk and return. Often, there is a target volatility percentage, such as 7% within the index.
FIAs using managed-volatility indexes may be an appealing choice for clients seeking to balance risk and reward in their retirement plans.
Ask About Your Clients' Needs
- Do they want to leave a legacy?
- Are they looking to protect their savings from market volatility?
- Are they seeking tax-deferred growth?
If they answer "Yes" to these questions, then a fixed index annuity might be right for them. Learn more about FIA features and get sales resources to help you start selling.
Benefits for Clients
FIAs offer growth potential while safeguarding principal from any market declines.
Key Terms and Features
This benefit ensures that the annuity fund value reaches the guaranteed minimum accumulation value at the end of the surrender charge period. If it is less than that, clients receive a one-time adjustment to raise the annuity fund value to that amount.
Crediting will never fall below this minimum rate. The rate is typically set at the time of purchase.
This crediting method calculates interest based on an index’s performance between two dates, typically over a 12-month term.
Interest is based on the growth of the index from the beginning to the end of the index term. As interest is credited, the earnings are locked into the index interest account value. The funds in the index interest account will never decrease if the market goes down.
After the initial term ends, a renewal rate is offered. The new rate is based on the current economic environment.
To encourage an annuity to grow long-term, policyowners may face surrender charges for early withdrawals. These charges are set as a percentage of the annuity’s value, and they generally decrease through the life of the annuity.
Your client may face other charges for early withdrawals. These include market value adjustments and IRS taxes or penalties.
An MVA applies to withdrawals and surrenders that are subject to a surrender charge. The MVA can increase or decrease the surrender value of the annuity. Generally, if interest rates rise after the beginning of the market value adjustment period, the MVA will decrease the surrender value. If interest rates have fallen, the MVA will increase the surrender value.
Optional death benefit riders can provide beneficiaries with a greater death benefit than what’s included in the base annuity policy. This enables your clients to optimize legacy planning or transfer of wealth to their heirs.
How Do FIAs Work?
FIAs can have different interest crediting options. Some of the most common are index participation rate, index cap rate and a fixed interest rate. These options provide a balance of growth and security, making FIAs a valuable tool for retirement planning.
Sales Resources
Our FIA Products
For products and rates available to you, start on the Annuities homepage and select your distributor in the drop-down menu.
Products, durations and features may vary by distributor.
