Fixed Index Annuities can be a great choice for your retirement income needs, however, do you know the key differences, benefits and drawbacks? Fixed indexed annuities are among the most misunderstood financial products on the market today. Fixed Indexed Annuity can be complex instruments, however by arming yourself with the right knowledge, you will increase your chances of making a smart buying decision that works toward your financial goals.
A fixed index annuity is an annuity whose interest rate is typically linked to an equity market index such as the S&P 500. They are generally considered safe investments because they provide inflation protection plus you have access to your money with some restrictions.
The downside is that returns on Fixed Indexed Annuities are typically capped so you will not benefit from potential stock market gains beyond a certain point. Fixed indexed annuities come with lower guarantees than traditional fixed annuities and some carry surrender charges if you try to withdraw your funds before some specified period (typically seven years).
Secure the BEST