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  • Spencer Herold

Fixed Index Annuities FAQ

Calculating how much money you will need for retirement and understanding different products and their benefits is important for your financial wellbeing. Fixed index annuities are an option that many Americans consider in their retirement planning toolbox.

Annuities are a retirement product that can be important in your overall retirement portfolio. Fixed index annuities, also known as FIAs, are sold by licensed insurance professionals who can help you find the right solutions to achieve your retirement goals.

Here are some frequently asked questions to help you better understand these products.

Q. Do I need a large amount of money to start an annuity?

A.  Many contracts can be started with as little as a $5,000 minimum.  If you are starting a fixed index annuity, talk to your financial professional about how to achieve your financial goals.

Q.  Are annuities too complicated to understand?

A.  Annuities are not as complicated as you may think. Fixed index annuities offer growth potential without risk of loss due to market volatility. Plus, they offer a steady stream of income that you cannot outlive. According to the Indexed Annuity Leadership Council, one in five Americans are familiar with FIAs and almost half of Americans understand FIAs can provide guaranteed lifetime income.

Q.  Are there tax benefits to a fixed index annuity?

A.   Fixed index annuities offer tax-deferred growth, which means taxes are not owed until a withdrawal is made.  Ask your tax professional any questions you have about tax impact if you are interested in an FIA.  

Q.  Do fixed index annuities invest in the stock market?

A.  Fixed index annuities do not directly invest in the stock market, but potential interest earned is based on an external equity or bond index. Some common indexes used are S&P 500® Index, and Dow Jones Industrial Average®(DJIA).

Q.  What is the difference between a fixed index annuity and a variable annuity?

A.  Fixed index annuities are a type of fixed annuity that earns interest based on changes in a market index, which measures how the market or part of the market performs. The interest rate is guaranteed to never be less than zero, even if the market goes down. Variable annuities earn investment returns based on the performance of the investment portfolios, known as “subaccounts,” where you choose to put your money. The return earned in a variable annuity isn’t guaranteed. The value of the subaccounts you choose could go up or down.  If they go up, you could make money, but if they go down, you could lose money.

It is important to remember that annuities are backed by the insurer that issues the policy and are regulated by state law. 

There is a lot to consider when it comes to planning for your retirement. Talk to your financial professional about retirement planning solutions that meet your needs and the benefits that mean most to you.

American Equity does not offer variable annuity products. If you would like more information on variable annuities please review the consumer education provided by the National Association of Insurance Commissioners (NAIC). Guarantees are based on the financial strength and claims paying ability of American Equity and are not guaranteed by any bank or insured by the FDIC. American Equity Investment Life Insurance Company® does not offer legal, investment, or tax advice. Please consult a qualified professional. The "S&P® and/or Dow Jones®" is a product of S&P Dow Jones Indices LLC (“SPDJI”), and has been licensed for use by American Equity Investment Life Insurance Company (“AEL”).  Standard & Poor’s® and S&P® are registered trademarks of Standard & Poor’s Financial Services LLC (“S&P”); Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC (“Dow Jones”). These trademarks have been licensed to SPDJI and sublicensed for certain purposes by AEL. AEL's products are not sponsored, endorsed, sold or promoted by SPDJI, Dow Jones, S&P, or their respective affiliates, and such parties make no representations regarding the advisability of investing in such product(s) and have no liability for any errors, omissions, or interruptions of the S&P and/or Dow Jones. The information provided is for educational purposes only and does not constitute advice. For specific details on how this may apply to your personal situation contact your personal financial advisor or insurance agent for more details. American Equity contracts are only sold through independent agents. To obtain a listing of agents in your area contact your state’s insurance department. 

Pull from our friends at American Equity blog posts.

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