FIA's are issued by life insurance companies and are not securities. They are regulated at the state level as a fixed annuity.

 

Key Points:

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• No annual fees

 

• Can be used in IRAs, non-IRAs, Roth IRAs

 

• Potential to outperform CDs & MYGAs (not the stock market)

 

• 100% principal protection

 

• Gains permanently locked in

 

• Gains grow tax-deferred in a non-IRA account

 

• Index Option choices can be changed

 

• Guaranteed Minimum Return

 

• Penalty-free withdrawal options

 

• Income Rider benefits can be attached at the time of application

 

• Some attached Income Rider benefits provide Confinement Care

 

• Can be converted to a SPIA for lifetime income

 

FIA's Protection

 

A Fixed Index Annuity (FIA) is a deferred annuity that protects you from market volatility because it’s a fixed annuity. A call option on a market index (like the S&P 500 index) is the typical underlying strategy. The upside return potential is limited by contractual levers like “point to point,” “participation rates,” and “spreads.”

 

If the index performs well, you can lock in those partial gains permanently on the contract anniversary date. Currently, there are over 700 different index option choices available, with over 45 different indices to choose from.

 

The majority of these annuity contracts have a surrender charge schedule for a specific period. Most FIA's have liquidity provisions that allow you to take money out annually and penalty-free if needed. Also, FIA's can provide a death benefit from the accumulation value or an attached benefit rider.

 

Income Riders (See Income Rider tab) attached to FIAs are an efficient way to deliver a lifetime income guarantee that can start at a future date of your choice. Income Riders can be added to the policy at the time of application, and most come with an annual fee for the life of the policy.

 

That annual fee is taken out of the accumulation value, not the income rider value. Those are two separate calculations within a FIA policy. Income Riders are, in essence, a phantom account and monopoly money that can only be used to calculate your first lifetime income payment. That’s the limitation, but the benefit is an income stream that you can never outlive...your own personal pension.

 

Some FIA Income Riders can also provide confinement care or enhanced benefit payments if you become ill. There are specific rules within the FIA policy that layout how to qualify for these benefits.  The good news about these types of riders is that they are “guaranteed issue.” That means no underwriting or medical tests are needed.

 

The way that we primarily use FIA's is to deliver the Income Rider guarantees for a future lifetime income. When someone wants an “Income Later” quote, we use our proprietary annuity calculators to run Income Riders and Deferred Income Annuities (DIAs).

 

Those are the two annuity strategies that contractually solve for future pension type income needs. Sometimes Income Riders have the highest number, and sometimes DIAs have the highest number. We quote both strategies and ALL carries to find the highest contractual guarantee for your specific situation and goals.

 

Coverage Summary

 

We like FIA's because they fully protect your principal and any index option gains are permanently locked in on each contract anniversary date (with most FIA structures). FIA's also work well in conjunction with MYGA's (Multi-Year Guarantee Annuities) to create a fixed annuity strategy ladder.

 

MYGA's are the annuity industry’s version of a CD, and FIA's are CD type products as well. Both FIA's and MYGA's provide full principal protection, and FIA's without attached riders have no annual fees. Remember that FIA's are commodity products and should be shopped with all carriers.

 

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