An FIA is a fixed index annuity which credits a minimum guaranteed interest rate of over a fixed number of years, and it includes an additional interest that gets credited and relies upon some kind of changes in a wide market index value.

The interest is calculated as per the formula which determines the total percentage change that is applied to the account value of the FIA. Insurers use participation rates as well as caps that spread wide and limit the amount of interest that simply gets credited upon the change in the value of the stock market index.

How fixed period annuities work
Annuities differ in an amount that is paid, payment frequency, as well as time periods on which the payments have been made. Since the total sum of money depends upon the amount paid into an annuity, a short fixed period annuity would have larger payments than a long fixed period annuity.

Some annuities can be paid out over the person’s lifetime that selects the end time amount on which the entire annuity will be paid. Fixed period annuities are such that every owner or simply a purchaser can choose the amount (end time) on which the annuity will be paid back.

Fixed annuities usually pay a fixed amount for about a certain fixed period of time and are chosen by the annuitant. The total time given is about 10 or 15 years; during this period, annual, bi-annual, or monthly payments are paid to the annuitant.

Fixed period annuities are usually offered for a certain period of time during which no other income is gained. In the case of death of an annuitant, before the annuity has finished paying out, the remaining annuity will be transferred to a beneficiary.

Key benefits of an index annuity

• Upside growth potential: Through index annuities, you can earn interest depending on the function of the market index; also, it increases the value of your retirement assets.
• Guaranteed principal protection: Your principal will be protected and accepted because of market decrease. Guarantees are backed by the claims which provide the ability to issue the insurance.
• The Tax Deferral Power: There is no need to pay tax on any index annuity that is achieved till they are withdrawn. Your assets can be increased much faster than a taxable account. Even you can find the potential earning interest in 2 different ways like – either on your principal, as well as on the interest which gets credited to your contract and over your tax savings.
• Lifetime Income: Some index annuities provide optional living benefit (guaranteed) riders who simply increase the amount that you receive for your life. There is also a number of riders that even guarantee to raise the income for a specified number of years.
• Beneficiary Protection: It transfers directly to a beneficiary and minimises the costs as well.

Equity-indexed annuities pros and cons
A fixed annuity is a retirement investment product which has been developed and maintained by several life insurance companies. Also, there are even several kinds of annuities, which have many advantages and disadvantages. However, all annuities arrive with some specific features.

On the other hand, fixed annuities are very similar to traditional bank CDs and they offer investors a certain return rate over the deposits for a certain time period. The money is held within fixed annuities which are not related to stock market and hence there is no danger of decreasing in the value.

However, fixed annuities usually offer an interest rate which keeps decreasing and can be achieved in a conservative brokerage account that consists of many bonds like investment-grade, as well as dividend stocks (blue chip), or same kinds of income-generating securities.

Every investor must be aware of the various numbers of equity-indexed annuities problems. The main features of fixed annuities, where opponents of this type of annuity usually focus on, are basically the fees that are included in these products.

Who can benefit from FIAs?
There are several best benefits of fixed-indexed annuities and they can simply play a great role in the retirement portfolios of a lot of people, which are as below.

• In order to have a lower tolerance for the risk purpose, each and every individual should usually approach retirement.
• Also, these are the people who are capable enough to maintain a certain fixed portion of their retirement savings for about 5 to 10 years. Also, they should look for higher income returns than the conservative savings in a low-interest rate environment.
• Even individuals who wish to secure a part of their future retirement income need regular income payouts at the annuity’s maturity date or person who guarantees the lifetime income rider.
• Individuals who wish to leave a legacy due to FIAs may consist of an optional death benefit.