Indexed Interest Potential

Features of a Fixed Index Annuity

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Benefits of a Fixed Index Annuity

Having a flexible and long-term approach to retirement is critical to a successful retirement. Luckily, a fixed index annuity (FIA) can provide both financial security and income stability.

Keep Your Money Safe

FIAs are linked to an external index that tracks an underlying index, such as the S&P 500. As a result, FIAs can generate income. Furthermore, you don’t have to buy stocks directly. Therefore, if the market takes a downturn, there is no risk to your principal. Instead, your insurer protects your principal. Alternatively, if the market rises, you can earn interest on your FIA. Additionally, the insurance company sets the interest rate at a reasonable rate of return.** As a result, no matter what happens to the market, your principal is safe and you can earn interest.

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The Crediting Method

Additionally, with a fixed index annuity you can choose the crediting method. Your insurer determines how much index interest you will receive. Certain rules and timeframes determine the amount. Let’s look at a few popular crediting methods.

  • Annually or monthly
  • Value averaged over time
  • Rate differences in a given period 
  • Your annuity contract date determines the index value.

Several Factors Influence Potential Interest Rates

If you are choosing the crediting method for your annuity, you should consider the many factors that influence your indexed interest potential.

Find out more about the interest potential of a fixed index annuity with MTD Financial.

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