For readers who lost 40-50-60% when the stock market crashed in 2007-March 2009, this material will be very exciting. This part of the website covers the basics of Fixed Indexed Annuities (FIAs) and why you may want to use one as a primary wealth-building tool.


Why Fixed Indexed Annuities (FIAs)?

Because they can have the following characteristics:

  • 100% principal protection (your money will never go backwards due to negative returns in the stock market).
  • Positive gains in a stock index are locked in every year.
  • A guaranteed rate of return (accumulation value) (this is an option on many products for an additional charge).
  • A guaranteed income for life (this is an optional rider on many products for an additional charge).
  • A free long-term care benefit (this is an option on many products for an additional charge).

Fixed Index Annuity Disadvantages:

  • 10% IRS penalty on withdrawals prior to 59 1/2 years of age
  • Early withdrawal penalties or surrender charges for large withdrawals prior to maturity or when withdrawing in excess of the 10% annual surrender-free portion
  • Ordinary income tax owed on earnings during the withdrawal or income payout stage
  • LIFO: Last in first out tax requirement so earnings are taxed first, unless annuitization takes place, which then uses a tax exclusion ratio
  • Fixed index annuities are not FDIC insured
  • Fixed index annuities do not capture the full upside of the stock market
  • Caps, participation, spreads and declared fixed interest rates are all subject to change on an annual basis
  • It is possible during a down year or years to have zero-interest crediting
  • Not all Equity Indexed Annuities offer a minimum guaranteed return.
  • Equity Indexed Annuities are insurance products and not considered a security or investment.
  • Guarantees are based on the claims paying ability of the issuing insurance company.

Does a wealth-building tool with the above-mentioned characteristics interest you?

We’d be shocked if it didn’t.

With proper asset allocation using FIAs as a wealth- building tool, the pain of the recent stock market crash could have been significantly mitigated.

It is for this reason that we have on this website an educational PowerPoint presentation that you can use to educate yourself further on FIAs.