If you are thinking about a fixed index annuity for your retirement plan, knowing the basics of fixed index annuities can help you sort out whether this is a good fit for your needs and situation.
Annuities are contracts between you and the insurance company. Started by you with a lump sum or multiple payments over time. In return, the insurance company promises to pay you money from the annuity in a single or series of payments. If you select the series of payments. If you choose the series of payments you may receive this money for the rest of your lifetime.
Just as with many other financial products, there may be a surrender fee for early withdrawal. In a fixed-indexed annuity where the insurance company takes on the risk. But it has a unique way of calculating growth by using a formula based on changes on a specific index. Generally, they have a floor and a cap that determine the interest rate you earn. The floor is always set a 0 so your annuity will never lose money. This means you face less risk than a variable annuity.
