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All About Fixed Index Annuities (FIAs)

Fixed index annuities (FIAs) are a popular tool used to provide lifetime income. An FIA isn’t an investment or tied to the market, but it still offers the opportunity to earn interest based on changes in an external index.1 While FIAs can be very useful piece for some in part of their retirement plan, you should know all the facts to determine if it’s the right tool for you.


Some find that one the biggest advantages an FIA offers is protection from downside market risk. Your principal, or money in the FIA, is not at risk to market losses. Perhaps why most seek out an FIA is that they are designed to provide a reliable stream of retirement income, either for a set period or for as long as you live. You can also have tax-deferred growth because you won’t have to pay taxes until you begin withdrawing money.


FIAs are definitely long-term retirement vehicles and depending on the contract you purchase some only allow for one withdrawal per year of up to 7-10% of the contract’s value, which means you wouldn’t be able to easily access your money in an emergency.Another disadvantage is the potential tax penalties for those withdrawing before age 59 ½. Contract owners may even be subject to a surrender charge.2 

Making the Right Choice for You

Once you know the advantages and disadvantages of an FIA, it’s time to talk to a financial professional. Before making any significant financial decisions, you can consult them to see if it makes sense for your financial situation. They can examine your goals and help determine if the advantages outweigh the disadvantages. They can even help you determine the best withdrawal strategy. Be sure to ask questions and make sure they’re looking out for your best interest.

Like with any retirement vehicle, FIAs have both advantages and disadvantages. They can be useful but not ideal for every retiree. Be sure that you educate yourself on the facts and consult a financial professional to help protect your financial future. Your retirement is too important to leave up to chance. Retirement options are also a topic covered in American Retirement Institute courses so sign up for a course today!


Annuity guarantees, including optional riders, are backed by the financial strength and claims-paying ability of the issuing insurance company.