Fixed indexed annuities (FIAs) and variable annuities are designed for different priorities. An FIA may credit interest based partly on the performance of a market index, while typically protecting the contract from direct losses caused by index declines. A variable annuity invests in selected subaccounts, so its value and potential income can rise or fall with the markets.
FIAs may include optional lifetime-income benefits and can offer tax-deferred growth, but they are not risk-free in every sense. Contract terms can include caps, participation rates, spreads, surrender charges, withdrawal limits, rider fees, and insurer-specific guarantees. “No market loss” does not mean unlimited upside, and an FIA generally does not receive the full return of an index.
Comparisons with CDs, mutual funds, and variable annuities should consider more than projected returns. Review liquidity, taxes, inflation, expenses, principal guarantees, crediting methods, investment flexibility, and the financial strength of the issuing insurer. CDs are generally FDIC-insured within applicable limits, while annuity guarantees depend on the issuing insurance company and applicable state protections.
Before purchasing, ask for a complete illustration and confirm how income, withdrawals, fees, surrender periods, and beneficiaries work. A qualified financial or insurance professional can help determine whether an FIA or another strategy fits your retirement goals; no investment guarantees a higher return than every CD or other alternative.
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