![](https://sp-ao.shortpixel.ai/client/to_webp,q_glossy,ret_img/https://apexfg.com/wp-content/uploads/2022/09/Thinking-how-Fixed-index-annuities-work.jpg)
In an unpredictable economic environment, there seems to be no haven for your cash. The lack of a safe place for money is one reason people choose fixed-indexed annuities (FIAs) as the cornerstone of their financial plans.
While it’s true that FIAs aren’t a fit for every senior, they may be a wise choice for those wanting potential market-related growth but aren’t willing to take on a lot of risks.
Fixed indexed annuities are vehicles you might want to discuss with a retirement specialist, especially if:
- You like the idea of moderate gains but are concerned about risking your savings.
- You are worried about outliving your cash and would enjoy having a guaranteed lifetime income stream.
- You believe you could need nursing home care at some point during your retirement and want an annuity to help pay for that care.
- You would like to leave a legacy to your spouse or other loved one.
If any of these situations is applicable, you may appreciate some of FIAs benefits, such as:
- A fixed-indexed annuity provides steady, predictable, tax-deferred growth.
- You can “ladder” annuities. A laddering strategy involves purchasing multiple annuities of lower value over a certain period. Laddering several annuities lets you offset lower returns by staggering the end dates of your contracts.
- An FIA provides contractually protection of your principal investment.
- FIAs may be customized so you can convert them into an income stream once you’ve retired.
- Certain FIAs give your loved ones a death benefit.
![](https://sp-ao.shortpixel.ai/client/to_webp,q_glossy,ret_img/https://apexfg.com/wp-content/uploads/2022/09/Surprised-about-Fixed-Index-annuities.jpg)
Annual Reset
In addition, a fixed indexed annuity features an “annual reset.” An annual reset means your FIA maintains its value even if the underlying index experiences volatility.
In an annual reset, if the underlying index has an up year, your account value gets that market-linked growth as interest credited to your account’s value. Your gains are added, locked in, and the new balance is reset as next year’s starting balance.
If the FIAs index experiences a down year, no interest is credited to the account for that year. This might seem like a negative situation until you realize that your fixed-indexed annuity didn’t lose any money.
An annual reset has two distinctive benefits when locking in gains. First, it gives your annuity contract protection from a market downturn. Your FIAs value won’t go down when the market heads south.
![](https://sp-ao.shortpixel.ai/client/to_webp,q_glossy,ret_img/https://apexfg.com/wp-content/uploads/2022/09/excited-about-the-protection-of-index-annuity.jpg)
Secondly, the starting balance for the following year doesn’t require you to “make up” lost value. An annual reset feature gives a fixed index annuity the potential to earn more interest. Other kinds of annuities, such as variable annuities, can, and often do, lose money due to market volatility.
Ken says, “Retire to the Max!” A fixed-indexed annuity can be a powerful, tax-advantaged retirement income planning vehicle. FIAs were explicitly created to help annuitants lock in market gains and provide a shield against losses.
Even if you are in a protracted bear market or experience a “correction,” your FIA account value stays intact, with no losses.
FIAs have many other features that benefit retirees and those about to retire. Those who want more gains than those provided by other safe money products should look into annuities, especially fixed-indexed products.