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What Is A Fixed Indexed Annuity

February 1, 2017


A fixed indexed annuity is a contract between you and an insurance company. In exchange for your premium payment, the insurance company provides you income, either immediately or at some time in the future. Your fixed indexed annuity can earn interest, allowing the money in your contract to grow, but is also protected from market index risk. Fixed indexed annuities offer a range of features and benefits that may help you accumulate assets for retirement, preserve what you’ve accumulated, turn those assets into a guaranteed stream of income, and help you pass on a financial legacy to your loved ones.


Whether your long-term objective is to build a source of guaranteed lifetime income, save for a specific retirement goal, or leave a legacy for loves ones, fixed indexed annuities are designed to meet your retirement needs.


Mitigating Inflation Risk

Many of us have probably realized that things just don’t cost what they use to. From every day products to cars and houses, price tags have risen across the board. Inflation can be a serious risk to your retirement as well. The longer you are in retirement, the greater the impact of inflation. The current rate of 2.1% impacts the cost of goods and services you buy. For example, $20.00 in 1980 has the same buying power in 2014 as $57.32.


Managing Market Risk

Anyone who has had money in the stock market during the past fourteen years has probably experienced a pretty rocky ride. Since 2000, we have witnessed the S&P 500® Index dropping approximately 50% two times. However, despite these drops, over this same time period, it was grown 21% as well. Although past performance is not an indicator of future results, you may be ready to take a portion of your retirement portfolio away from market volatility risk. You may like the appeal of capturing a portion of the growth, but avoiding the losses. A fixed indexed annuity can protect your recent gains against future market declines, while preserving the potential opportunity for growth.


Overcoming Interest Rate Risk

Lower interest rates reduce retirement income by lowering growth rates for retirement savings accounts and assets, as well as causing purchasing power to erode more quickly.  As a result, you may need to save more in order to accumulate adequate retirement funds. In low interest rate environments, more conservative strategies may not provide adequate investment growth; as a result, assets can be exhausted earlier than expected. A beneficial approach can be to reposition a retirement strategy to include protection and address lower interest rate risk. Moving a portion of your portfolio to a fixed indexed annuity can help generate potential for interest income and reduce volatility. You can also count on guaranteed principal protection from market losses and lower interest rate environments.


Outlasting Longevity Risk


It is no secret that people are living longer in retirement today than at any point in history. Advances in medicine and technology have had an impact on aging within our society. On average, one out of four 65-year olds is expected to live into their nineties. Many people underestimate how long they will live, putting strain on personal savings and increasing the likelihood of outliving their assets. You probably agree you would like to maintain your standard of living when you reach retirement and have the confidence that you will not run out of money. A fixed indexed annuity with an optional lifetime income rider can address the longevity risk directly by providing a guaranteed lifetime retirement income. The income value grows at a guaranteed rate and then at the time of your choosing, you can activate guaranteed lifetime retirement income. Additionally, if you pass away, any leftover money can go to your beneficiaries. You can feel comfortable knowing the income gap is filled and some predictability has been added to an often unpredictable future. Whether you live until 80 or  120, you will know you can count on guaranteed  lifetime income and can live a quality life in retirement.


Annuities aren’t right for everyone, but they may be right for you. Call Sage Capone at 808-753-1868 for a complimentary portfolio review to see if annuities are right for you.



2 Standard & Poor's 500® S&P® is a registered trademark of Standard & Poor's Financial    Services LLC ("S&P"). This trademark has been licensed for use by S&P Dow Jones Indices LLC and its affiliates. S&P® and S&P 500® are trademarks of S&P. The S&P 500 is a product of S&P Dow Jones Indices LLC and/or its affiliates.

3 S&P 500®,, accessed 10/03/13, time periods 03/20/2000 - 09/30/2002 (48% drop) and 10/08/2007 - 03/02/2009 (56% drop)

4 Social Security Website. Calculators: Life Expectancy. September 17, 2014.


*Guarantees provided by annuities are subject to the financial strength of the issuing insurance company; not guaranteed by any bank

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