What is a Fixed Indexed Annuity?

A Fixed Index Annuity (FIA) is a type of insurance product designed to provide retirement income. It combines features of a traditional fixed annuity with the potential for growth linked to a stock market index, such as the S&P 500. Unlike direct investments in the market, the principal is protected from losses, meaning you won’t lose money due to market downturns.
Earnings in an FIA are credited based on the performance of the chosen index, but gains are subject to participation rates, or spreads that limit returns. Some annuities guarantee a minimum interest rate, ensuring steady growth even if the index performs poorly. Upon retirement, the annuity can provide regular income payments for a specified period or for life, helping to manage longevity risk.
Fixed Index Annuities are often used by seniors looking for a balance of growth potential, principal protection, and predictable income during retirement. They can be a valuable part of a diversified retirement plan, especially when combined with other income sources like Social Security and Medicare benefits.