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By: Kelly George
Insurance Sales Manager for Ohio CU Financial Services

What are fixed index annuities?
A fixed index annuity is a kind of deferred annuity: a guaranteed contract with the insurance company designed to accumulate savings over time and provide income in the future. After the accumulation period, you can typically choose to receive a lump sum, spread payments over a fixed number of years, or receive income for the rest of your life.
Unlike some annuities that expose you to market risk, fixed index annuities protect your principal until you decide to take guaranteed income in retirement while offering tax advantages, market growth potential, and a floor to protect against losses. It’s tied to an underlying market index, so when the index rises, so do your gains up to the limit outlined in your contract. But it’s important to know that your gains won’t match the index’s total performance due to fees, rate caps, spreads, and participation rates. On the other hand, if the index falls, your principal is protected from losses.

Advantages and Disadvantage of Fixed Index Annuities
Two major advantages to consider are growth potential of your investment and downside risk protection. Annuities offer healthy growth with the structure of their return on investment. Protection of your investment is achieved several ways. Taxes are deferred until you withdraw and at that time you will likely be in a lower
tax bracket. You have an option for principle protection for your lifetime. Also, the issuing insurance company provides guarantees for your investment based on their claims-paying ability.
Disadvantages include risk and costs. Growth is anticipated but not guaranteed and your investment is not FDIC/NCUA insured so it may lose value. Fees, caps, spreads and other costs are paid out of your returns. A surrender penalty (plus applicable taxes) is required if you withdraw your funds before age 59 ½.

Is a fixed index annuity suitable for your financial portfolio?
When creating a financial plan, there is no one best product. But some products can be a better fit to help meet your retirement goals, whether you are experienced or just getting started.
This is just a summary of indexed annuities. If you would like to discuss whether an index annuity is suitable for your retirement plan, please request more information through ohioCUfinancialservices.com.