Fixed Index Annuities
Fixed index annuities may be a good choice if you want the opportunity for accumulation, but don't want to risk losing money in the market.
Fixed index annuities can offer:
- Principal protection from market downturns
- Tax-deferred growth potential
- One or more index allocation options
- A choice of crediting methods
- Income options, including income for life
- Death benefit options
How do fixed index annuities work?
Fixed index annuities provide the guarantees of fixed annuities, combined with opportunity to earn interest based on changes in an external market index. But because you are not actually participating in the market, the money in your annuity (your principal) is not at risk.
Think of it as a 4 step process:
- First you purchase your annuity from an insurance company, then the insurance company invests it on behalf of all annuity owners to support the benefits of the contract.
- The Accumulation phase is where your annuity will earn a fixed rate of interest that is guaranteed by the insurance company or an interest rate based on the growth of an external index.
- Tax-deferred growth happens until you receive money from the contract. Tax-deferred interest means the money in your contract can grow faster.
- The Distribution phase is when you may receive the amount allowed by your contract in either a lump sum, over a set period of time or as income for the rest of your life.
For more information on annuities, watch "The ABC's of Annuities" provided by Allianz.