Fixed Index Annuities

A Fixed Index Annuity (FIA) is a type of insurance product designed to provide a combination of principal protection, potential market-linked growth, and often a guaranteed income stream in retirement. This type of annuity does not involve the risks of variable annuities and is considered much safer.

Basic Structure: You pay a premium (either a lump sum or a series of payments) to an insurance company. The insurer credits interest to your account based on the performance of a market index – commonly the S&P 500, Russell 2000, or another benchmark. Your principal is protected. You will not lose money due to a market decline (as long as you do not make early withdrawals). Among the FIA’s that our carriers offer are those with substantial premium bonuses.

Interest Crediting: Interest is calculated using an index formula rather than directly investing in the market. 

Common crediting methods include:

• Point-to-point—compares the index value at the start and the end of the term
• Monthly average—averages the index’s monthly closing values
• Monthly sum or cap—adds monthly changes, often subject to a cap

Growth is limited by factors such as cap rate, participation rate, spread or margin.

Protection Features: There will never be loss due to a market drop. Even if the market goes down, you typically earn 0%, not a negative return. Some FIA’s guarantee a minimum accumulation value, regardless of the index performance.

Income Options: After a certain period (the surrender period, which is usually 7–10 years), you can withdraw funds or annuitize. Some contracts include income riders which can guarantee lifetime income growth (e.g., 5–7% annually for income purposes), even if the market performs poorly.

Not all annuities are equal, and not all annuity providers are top shelf! Jemstone Financial Services specializes in only the best Fixed (including Immediate Annuities) and Fixed Index Annuities on the market today. We only work with the companies who are among the highest rated for their financial stability and trustworthiness.

Fixed Annuities and Fixed Index Annuities provide guarantees against losing principal when the stock market goes down. The Fixed Index Annuities allow the accumulated value in the contract to rise (subject to a cap, margin, or participation rate) when the market goes up, but they provide a Zero Floor when the market drops. Our clients find these savings vehicles provide market-type gains without the associated risks.

Annuities provide tax-deferred growth of your funds. Withdrawal options allow flexibility to pull out money when you need it (subject to certain contractual and IRS limitations). Annuities can provide a death benefit to help build a legacy that may avoid probate. 

Some annuity contracts offer optional riders to provide a Guaranteed Lifetime Income during your retirement years—an income that you can never outlive! That’s right! Even if your contract accumulated value has been dwindled to zero—they will continue paying your lifetime income as long as you live. 

Jemstone Financial Services will work with you to find the most appropriate annuity to accomplish your financial goals.