Edwards Wealth Protection Advisors
Create a secure, comfortable retirement.
Fixed indexed annuities can play a role in a well-rounded retirement plan. Here’s how they work, and how to determine if one is right for you.
Fixed indexed annuities, explained simply
How a fixed indexed annuity works
Fixed indexed annuities
Index-linked growth with principal protection
- How it works
- An insurance contract that credits interest based on the performance of a market index (such as the S&P 500) through a crediting formula, without investing directly in the market. Your principal is not exposed to index losses.
- Growth
- Interest grows tax-deferred while it stays in the contract.
- Income
- When you’re ready, you can turn the value into guaranteed income for a set period or for life.
- May suit
- Clients nearing or in retirement who want growth potential without market losses, and a dependable income stream.
Trade-offs
What to weigh before you buy
- Limited gains
- Index-linked credits are limited by caps, participation rates, or spreads, so you won’t capture the full gains of the index.
- Access to your money
- Surrender charges usually apply to withdrawals beyond the free amount during the surrender period, so treat this as long-term money.
- Taxes
- Earnings are taxed as ordinary income when withdrawn, and withdrawals before age 59½ may incur a 10% IRS penalty.
- Guarantees
- Guarantees rely on the claims-paying ability of the issuing insurer. Annuities are not FDIC insured.
Fixed indexed annuity benefits
What a fixed indexed annuity can do for you
Guaranteed lifetime income
Your own personal pension, converting retirement savings into a predictable stream of guaranteed income that you cannot outlive.
Downside market protection
Protect your principal investment from market losses, offering a safe haven during economic volatility.
Tax-deferred growth
Earnings grow tax-deferred until you begin taking withdrawals, allowing your money to compound faster than it would in a traditional taxable account.
Is this a fit?
Who fixed indexed annuities tend to serve
- People approaching or in retirement who want to reduce market risk
- Clients who want guaranteed income to help cover essential expenses
- Anyone who wants to protect principal while it grows at a predictable rate
- Clients who have maxed out, or are nearing the limits of, traditional accounts
Fixed indexed annuities are not right for everyone and shouldn’t hold money you may need soon. They are not a substitute for an emergency fund, a 401(k), or an IRA. We’ll compare alternatives and tell you when something else may serve you better.
Start here
A 30 minute strategy call
We’ll review your goals, explain how fixed indexed annuities work, and show whether one belongs in your plan. No obligation.
Request a personalized quote
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