A fixed indexed annuity is a fixed deferred annuity. The insurance company credits interest using a formula tied to the change in a market index. You do not own the index, and you do not own the stocks in the index.
The U.S. Securities and Exchange Commission’s investor bulletin on indexed annuities (July 31, 2020) describes that structure. It also notes that dividends on the stocks in the index are usually left out of the calculation. The interest you might be credited is not the same number you would see in a headline about the stock market. A cap, a participation rate, or a spread can reduce it further. Those limiters are explained on the cap, participation, and spread page, using only the hypothetical illustrations the SEC and FINRA have published. They are not market averages, and this site does not quote a “typical” cap.
If the index goes down over a crediting term, a fixed indexed annuity typically credits zero percent for that term, as long as you do not take money out. Interest that has already been credited is usually locked in. If you withdraw in the middle of a term, you may lose that term’s index interest that has not been credited yet. Those points are in the National Association of Insurance Commissioners’ Buyer’s Guide for deferred annuities (revised 2013). This site paraphrases that guide and links it. It does not reprint it.
None of that means the contract cannot pay you less than you put in. A surrender charge, which the SEC describes as often lasting six to ten years or longer, can leave you with less than the premium you paid. The contract is not a bank deposit. FINRA states that annuities are not FDIC or SIPC insured. Any guarantee is only as strong as the insurer’s ability to pay, and it exists only in the wording of a particular contract.
Who this site is for
IndexedAnnuity.com is for people who have heard the product name and want to read the mechanics before they sit down with an insurance producer, a tax preparer, or both. It is also for people comparing the idea with a declared-rate fixed annuity, a variable annuity, or a bank certificate of deposit. It is not a shopping tool. There are no contract rankings, no insurer ratings, and no “best annuity” list, because those would be opinions this site is not in a position to make.
If you already own a contract, the pages can help you name the features to look up: the crediting method, the renewal of caps and spreads, the surrender schedule, any bonus, and any income rider. The contract and the insurer’s disclosure control. State law can change what a free-look refund looks like and what minimum values must be offered. A description on this site that is true of many contracts can still be wrong for yours.
Start with a guide
How interest is credited
Terms, a down index, locked-in interest, and withdrawals mid-term.
Vs a variable annuity
Separate accounts can fall. A fixed indexed annuity is a different contract.
Is one right for you?
Questions, not a score. This site does not tell you to buy.
Books
Readers sometimes want a book-length treatment. These Amazon listings are linked so you can look them up. Linking a book is not an endorsement of the marketing in its title, and it is not a statement that the book is accurate. This site does not sell the books and does not sell annuity contracts.
- Indexed Annuity Secrets: How the Affluent Escape the 401(K) Trap to Exponentially Grow Their Wealth — Gregory Stevenson. Paperback; the Amazon listing shows a 2024 date.
- The Objective Guide to Fixed and Indexed Annuities — Robert A. Esperti, Renno L. Peterson, and Patrick A. Jeffers. Paperback, 2014.
- FIA ASAP! — Shirley Luu with Enzo Giovanni.
- Equity-Indexed Annuities: The Smart Consumer’s Guide — Jay D. Adkisson. Paperback.
- Annuities For Dummies — Kerry Pechter. Second edition, paperback, 2023. It is about annuities in general, not only indexed annuities.
The same links sit in the rail on every page. Primary-source links for regulators are under the books. Each article also lists, at the bottom, only the sources that article actually relies on.
Sources
- U.S. Securities and Exchange Commission, Updated Investor Bulletin: Indexed Annuities (July 31, 2020)
- National Association of Insurance Commissioners, Buyer’s Guide for Deferred Annuities (revised 2013)
- FINRA, The Complicated Risks and Rewards of Indexed Annuities (July 14, 2022)
- FINRA, Annuities