3-minute article

How fixed indexed annuities protect clients against downside risk

Investing directly in the market exposes investors to both volatility and market risk. This uncertainty can make it difficult to create a reliable retirement income plan. Fixed indexed annuities (FIAs), which track market indexes but aren’t invested directly in the market, allow some exposure to market gains while avoiding market downside.

How FIAs Work

A fixed indexed annuity allows you to grow your money when markets are up — and lock in gains when they decline.

Upside potential is offered through the opportunity to earn interest credits linked in part to the performance of an external market index. The annuity's value can grow when markets rise.

When markets decline, guarantees in the annuity provide protection from loss. While it's possible to earn zero percent interest in any given interest crediting period, you can never earn less than zero.

In addition, interest you earn is locked in and cannot be lost — even if the market goes down.

FIA Growth versus the S&P 500®

This graph demonstrates how the S&P 500®'s historical performance over 10 years compares against growth of an FIA that tracks the same index.

Though the amount of interest you can earn with an FIA will typically fluctuate depending on the specific terms of the annuity contract, performance is more stable than in the underlying index. This stability provides an opportunity to pursue growth without risk of loss due to market downturns.

Locking in gains provides dependable growth without market loss

Premium that is allocated to one of the Index Strategies will receive interest that is calculated in reference to the upward movement, if any, of an external market index, modified by limitations such as a Cap Rate, an Annual Spread, or Participation Rate. This hypothetical example is for informational purposes only and is not indicative of past, nor intended to predict future performance of any specific product including an annuity; nor is it intended to represent any particular product or interest crediting method. The annual cap limits interest credits to 4% each term. Fixed and indexed annuities are not stock market investments and do not directly participate in any stock or equity investments. Market indices may not include dividends paid on the underlying stocks, and therefore may not reflect the total return of the underlying stocks. Clients who purchase indexed annuities are not directly investing in a stock market index.