Financial professionals and the insurance company that issues the contract must disclose any and all fees associated with annuities. They must clearly explain withdrawal charges, which may be incurred if you surrender the contract during the withdrawal charge period or withdraw money beyond the penalty-free amount allowed in the contract.

But not all FIAs are the same, and understanding the difference among products can help you choose the FIA that’s right for you. When you purchase a FIA, you can allocate your premium among one or more interest crediting strategies. While your money is not invested directly in the index, you may receive interest credits based partly on how the index performs. These strategies vary from product to product and may include management fees, along with caps, participation rates, and spreads, which may limit the interest credited in exchange for protection from stock market risk or losses. There may also be a charge for optional riders. Rider features also vary by product and can offer benefits like lifetime income, increased liquidity, or an enhanced death benefit.

Fixed indexed annuities are long-term, tax-deferred products and can be a valuable solution for those looking to grow their retirement savings. Annuity earnings will grow on a tax-deferred basis until you begin taking withdrawals or surrender the annuity.* Over time, you will have the potential to build more retirement savings than you would have been able to had your earnings been taxed as income. However, there is no additional tax benefit associated with funding a FIA from a tax-qualified source like a 401(k) plan.

Since inflation can decrease the purchasing power of your savings, a FIA with an income rider may offer payout rates that are indexed to inflation. This can help you keep pace with the rising cost of goods and services and offset the effects of inflation on your retirement savings. The other thing to remember about a FIA is that it can provide a guaranteed stream of income during retirement while offering growth potential and risk mitigation. Keep in mind that a FIA is just one tool in your portfolio, while you may employ other tools for long-term growth. Talking with a financial professional can help you assess how you can optimize your portfolio during your retirement years to help ensure that it can keep up with inflation, continue to grow, and help you reach your financial goals for the future. 

It’s important to remember that FIAs are designed to help meet your needs for long-term retirement savings and income. In exchange for tax-deferred growth potential, protection from market loss, and the potential for guaranteed lifetime income, FIAs have limited liquidity compared to some other products. However, in most cases, FIAs allow you to withdraw up to a specified percentage of the contract’s accumulated value each year during the withdrawal charge period without any charges. Once the withdrawal charge period has ended, funds may be withdrawn without any charges.

Fixed indexed annuities are insurance products that are designed to help you manage certain financial risks associated with retirement, such as volatile markets, falling interest rates, and longevity. They do not directly participate in any stock or equity investments, so your principal is protected from loss due to market downturns. That said, the interest on a portion of your premium is tied, in part, to a published stock market index, giving you the opportunity to benefit from market trends without owning stocks. This is where a FIA provides the dual benefit of growth potential and risk mitigation. 

While some life insurance policies can offer growth potential and annuities can include death benefits, the two vehicles serve distinctly different purposes. Life insurance policies are designed primarily to provide for your loved ones in the event you pass away. Annuities, on the other hand, can provide you and/or your partner with guaranteed income while you’re alive. In many cases, you can benefit from having both.