A fixed index annuity (known for its tax-deferred benefits) is a contract between you and an insurance company that provides a guaranteed minimum interest rate, tax-deferred growth, and guaranteed payments through annuitization in retirement. This unique combination of benefits can make fixed index annuities an ideal low-risk component of your long-term retirement plan. Fixed index annuities earn interest, in part, based on changes in a market index, which measures how the market or part of the market performs. All guarantees are based on the claims-paying ability of the issuing insurance company.
The potential for interest credited to the policy is affected by changes in the index over the crediting period and isn’t affected by the index directly. Even though changes in the index affect the index interest credited to the annuity policy, a fixed index annuity is not an investment in the stock market and does not participate in equities, commodities, fixed income, or currencies.