Four ways fixed index annuities can help protect your income over time
Annuities offer protection, growth opportunities, and lifetime income options that can help lower retirement income risk in uncertain economic times.
At some point your income shifts from a steady paycheck to a mix of sources you’ve built during your working years. When that happens, market downturns and economic changes can have an even greater impact on your day-to-day finances.
A good defense against tough economic times is to create a retirement financial plan that includes diverse sources of income. And fixed index annuities can be a useful tool in that strategy.
What’s a fixed index annuity?
A fixed index annuity is a long-term contract with an insurance company. You contribute money, either all at once or over time, in exchange for a set of features designed to help protect your money and provide income growth potential over the long term. Here are a few ways a fixed index annuity can help you prepare for retirement.
Protecting your money from market downturns
Money in a fixed index annuity isn’t directly invested in the market, which means it isn’t exposed to market losses. Any gains that are credited are locked in, helping you preserve what you’ve built even during periods of economic volatility.
Providing growth opportunities without market risk
You can choose from a fixed strategy or a range of different index-linked strategies that tie your annuity’s growth to index performance, without direct index exposure. At the end of each crediting term, you earn interest credits based on a credited rate, with potential growth limited by strategy features like caps or participation rates.
Your index crediting will never be less than zero, and any gains are locked into your annuity’s value. You benefit from market-related growth potential without the risk of a direct investment.
Compounding your money with tax-deferred growth
Your money grows tax-deferred, meaning you don’t pay taxes on interest credits until you withdraw them. This allows more of your money to earn interest and continue compounding over time.
Creating income you can rely on
Fixed index annuities can provide a source of guaranteed income in retirement. The money you’ve accumulated may be available as either a lump sum, a series of fixed installments over a specified period of time, or even guaranteed payments for life, depending on the options offered by your contract. Not all payment structures are available with every annuity.
Knowing you have scheduled, reliable income payments in retirement may make dealing with economic uncertainties a little easier.
What else you should know
A fixed index annuity is designed as a long-term financial commitment and includes a surrender charge period that limits access to your money. While you will have access through an annual penalty-free withdrawal amount, overall liquidity will be limited. Withdrawals that exceed the penalty-free amount during the surrender charge period will be subject to a fee. The length and terms of the surrender charge period will vary by contract.
Making your income work for your life
Fixed index annuities can play a role in your broader income strategy by helping balance growth potential with protection, and providing a source of income you can rely on over time.
Used thoughtfully, they’re not just about preparing for one phase of life, but about supporting how you want to live across all of them.
The content provided is for informational purposes only and does not constitute advice. For specific details on how this may apply to your personal situation contact your personal financial advisor or insurance agent for more details. American Equity contracts are only sold through independent agents. Please contact your state insurance department to see if there is an independent insurance agent in your area appointed to sell American Equity annuity contracts.
Possible interest credits for money allocated to an index-linked crediting strategy are based upon performance of the specific index; however, fixed index annuities are not an investment, but an insurance product, and do not directly invest in the stock market or the index itself.
Surrender charges may apply to excess withdrawals that exceed annual free withdrawals available under the contract. You may be subject to a 10% federal penalty if you make withdrawals before age 59 1/2.
Market Value Adjustment (MVA) applies to partial withdrawals that exceed the free withdrawal amount allowed and surrenders occurring during the surrender charge period.
Under current tax law, the Internal Revenue Code already provides tax deferral to qualified money. There is no additional tax deferral benefit if you purchase the contract through a tax qualified plan, such as an IRA or Roth IRA, and you should only purchase the contract for its other benefits.
Guarantees are based on the financial strength and claims-paying ability of American Equity and are not guaranteed by any bank or insured by the FDIC.
American Equity Investment Life Insurance Company® does not offer legal, investment, or tax advice. Please consult a qualified professional.
