What Is The Floor For Most Indexed Annuities?

Shawn Plummer, CRPC

Chartered Retirement Planning Counselor

Indexed Annuities: Basic Concept

Indexed annuities are a type of annuity product that offers a combination of risk and reward based on a specific market index, like the S&P 500. The returns in indexed annuities are linked to the performance of this market index.

Floor in Indexed Annuities

The “floor” in indexed annuities refers to the minimum guaranteed value the annuity will retain regardless of market conditions. This feature protects the investor’s principal to a certain extent.

Common Floor Structures

  • 85.5% Floor with Growth Potential: Many indexed annuities ensure that at least 85.5% of the original investment is protected. This portion of the investment grows annually at a rate typically between 1% to 3%.
  • Original Investment Minus Fees and Withdrawals: Another floor structure guarantees the return of the original investment amount, reduced by any fees charged by the annuity provider and withdrawals made by the investor.
  • 100% Floor Options: A few indexed annuities offer a 100% floor where the entire original investment is protected. Like the 85.5% floor option, this investment also grows annually at a rate of 1% to 3%.

Comparison of Floor Structures in Indexed Annuities

Floor TypeProtection LevelGrowth PotentialNotes
85.5% of Original Investment85.5% Protected1-3% Annual GrowthCommon option, balancing risk and reward
Original Investment minus FeesVaries Based on Fees1-3% Annual GrowthOffers more protection, costs may reduce floor
100% of Original InvestmentFull Principal Protection1-3% Annual GrowthHighest protection, less common option


Understanding the floor in indexed annuities is crucial for investors seeking a balance between security and growth potential. The 85.5% floor provides moderate protection with growth potential, while the 100% option offers the highest level of security. It’s important to consider personal financial goals and risk tolerance when choosing an indexed annuity.

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Shawn Plummer, CRPC

Chartered Retirement Planning Counselor

Shawn Plummer is a Chartered Retirement Planning Counselor, insurance agent, and annuity broker with over 14 years of first-hand experience with annuities and insurance. Since beginning his journey in 2009, he has been pivotal in selling and educating about annuities and insurance products. Still, he has also played an instrumental role in training financial advisors for a prestigious Fortune Global 500 insurance company, Allianz. His insights and expertise have made him a sought-after voice in the industry, leading to features in renowned publications such as Time Magazine, Bloomberg, Entrepreneur, Yahoo! Finance, MSN, SmartAsset, The Simple Dollar, U.S. News and World Report, Women’s Health Magazine, and many more. Shawn’s driving ambition? To simplify retirement planning, he ensures his clients understand their choices and secure the best insurance coverage at unbeatable rates.

The Annuity Expert is an independent online insurance agency servicing consumers across the United States. The goal is to help you take the guesswork out of retirement planning and find the best insurance coverage at the cheapest rates

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