Fixed Index Annuities with Riders
Your Guide to Market-Linked Growth with Guaranteed Lifetime Income
When you’re looking for a way to have both protected, market-linked growth potential and predictable lifetime income, a Fixed Index Annuity paired with an income rider may be a great option. This product allows you to invest a lump sum with an insurance company, where the investment grows based on the performance of a market index, all while protecting your principal investment from any market loss. When you add an income rider to this investment, it guarantees a steady retirement paycheck for life as well, despite any market conditions.
What makes FIA+Riders Different
Principal Protection
Your initial investment is completely safe from market fluctuations. You’ll never lose money due to economic volatility.
Guaranteed Lifetime Income
Riders provide a set, annual, income stream for life. They also offer features like roll-ups or bonuses to increase income before payment even begins.
Tax-Deferred Growth
Both the investment and the rider benefits will grow tax-deferred until the withdrawals are made, allowing for more efficient compounding over time.
Customizable
Riders may include inflation adjustments, options for spousal continuation, or long-term care integration for a very customizable, future income plan.
How FIA+Riders Work
For the FIA, you make a lump-sum payment to an insurance company and your investment value grows annually as it is tied to an index and any downside is protected. When you add a Rider, you pay a fee, which sets the income benefit base that may grow annually regardless of market conditions. When you are ready, you exercise the rider to receive the guaranteed income based on the benefit base and your age. You are able to access the account value outside the rider, but withdrawing this way can diminish the guaranteed income.
See what your projected return and annual income could be.
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Is a FIA+Rider Right for Me?
FIAs+Riders work well for people who are:
Desiring Peace of Mind
A guaranteed, lifetime income stream can cover essential expenses and protect loved ones with spousal or legacy income options.
Interested in Balancing Security with Growth
Those who want to gain a steady income stream and earn interest linked to a trusted market index, but who also want protection from losing principal.
Seeking Fixed Annuity Alternatives
People who prefer products with principal guarantees that exceed fixed annuity returns but with limited downside risk. When you add a rider, you can gain increased flexibility and customization that makes a Fixed Index Annuity a great solution for gaining income while shielding assets from the market.
Important Considerations
Growth Limits
Returns are typically capped or can be reduced by participation rates and fees, so the gains will not be as great as if they were invested independently in the same index fund.
Limited Liquidity
Withdrawals may be limited and incur penalties if done early or beyond penalty-free amounts.
Insurance Company Risk
Guarantees depend on the issuing company’s financial position, unlike FDIC-insured products.
Current Market Environment
When the market is stable or rising FIAs could be a practical option for inventors seeking controlled exposure to market gains with a protected principal. Rising and relatively high interest rates in the previous years have allowed insurers to offer better cap rates, higher guaranteed minimums, and flexible crediting options.
Tax Considerations Made Simple
FIAs provide tax-deferred growth similar to other annuities, meaning taxes are only due upon withdrawal. Qualified purchases (those made with retirement account funds) have regular income taxation on those withdrawals. Non-qualified (or after-tax money) purchases are only taxed on the earnings.
How FIAs+Riders Compare to Alternatives
FIAs vs. Traditional Fixed Annuities
FIAs provide higher growth potential by linking it to an index performance while fixed annuities give a set interest rate without any market exposure.
FIAs vs. CDs
FIAs offer tax deferral and a potential for higher returns overall but there is less liquidity and FIAs are not FDIC insured.
Fixed Indexed Annuity
Fixed Annuity
Certificate of Deposit
Medium–high
Low–medium
Low
Yes, 100% guaranteed
Yes, 100% guaranteed
Yes, FDIC-insured
Limited, early withdrawal penalties
Limited, early withdrawal penalties
Limited until maturity
Low (principal is protected)
Very low
Very low
Tax-deferred growth
Tax-deferred growth
Tax-deferred growth
Optional with Rider
Yes
No
Making Your Decision
Before deciding on a Fixed Index Annuity, consider the timeline of your investment, your income needs, and comfort with the complexity of the product and terms. If you are seeking growth beyond the traditional fixed rates with a built in safety net for your investment, a FIA could be a great investment choice.
Key Questions to Ask Yourself:
Do I understand the contract’s participation rates, caps, and fees?
Am I comfortable with capped growth versus full market exposure?
Can I commit the funds for the contract without needing the liquidity?
How does this fit with my other retirement savings strategies?
With FIAs, the most important piece is considering the guarantees and the limitations on growth and how this type of annuity meets your retirement income goals.
Have more questions? Let’s chat.
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Jeremiah Konger
Annuity Advisor
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