When it comes to Fixed Index Annuities, there is a lot of misinformation floating around. As a result, people are unsure about how they work and what they can expect in earnings. This comprehensive guide will break down everything you need to know about how they work and how much interest you can realistically expect to earn. So don’t invest in an annuity until you read this guide!
How do Fixed Indexed Annuities Earn Interest?
For those new to annuities, a fixed index annuity is an insurance-based retirement savings plan that allows an investor to earn interest from a fixed rate of interest and the positive movement of an external index without the stress of losing money to a stock market crash.
Fixed index annuities are insurance policies for retirement.
What Is The Average Rate Of Return On An Annuity?
Both my wife and I own a few fixed index annuities. Before I purchased the first FIA, I researched 1,000+ retirement plans to find the perfect annuity for me. I tested on myself first and then proceeded with additional index annuities after my results.
Fixed Index Annuity Example #1
This fixed index annuity was purchased in 2016 for $10,002.49. I chose an S&P 500 strategy to earn my interest. Since then, I have made $4,894.63 of interest. That is a nearly 49% increase in just five years.
I paid zero fees.
I lock in every gain and can not lose money when the next stock market crash occurs.
| Investment | Interest | Years | Return |
|---|---|---|---|
| $10,002.09 | $4,894.63 | 5 | 49% |
Index Annuity Example #2
After finding that my fixed index annuity could perform well, I rolled over one of my wife’s old 401(k) plans to the same annuity in 2017. Over the past four years, my wife has earned $37,783.68 in interest. That’s a 35.5% increase! She paid no fees, locked in every penny of interest, and will not lose any of her earnings.
| Investment | Interest | Years | Return |
|---|---|---|---|
| $101,724.09 | $37,783.68 | 4 | 35.5% |
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Next Steps
Fixed indexed annuities, or FIAs, have been growing in popularity as people are looking for a way to save for retirement without the stress of losing money during a market crash. Unlike CDs or traditional fixed annuities, an FIA will earn interest from a guaranteed interest rate or the positive performance of an external stock market index. These benefits mean your retirement savings plan can grow safely without paying hefty fees.
Use our fixed index annuity calculator to get estimates. Contact us today, and we’ll help you find the perfect FIA to fit your needs.
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Frequently Asked Questions
Do annuities earn interest?
Fixed annuities are similar to Certificates of Deposits because they provide a guaranteed rate of return. Fixed indexed annuities earn interest based on the movement of a stock market index without risk. Variable annuities grow based on the success of one or more subaccounts and carry risk. Single-premium immediate annuities earn little to no interest.