What is a Fixed (Equity) Indexed Annuity

by Jeff Rose on June 12, 2012

“What is a fixed (equity) indexed annuity?”

If you’re thinking about getting an annuity to help with retirement, you’ve likely asked yourself that question.

Sure there are plenty of businesses with knowledgeable investment professionals that can take care of your annuity for you, but if you’re still like me then the idea of letting someone you barely know handle your money is far from appealing.

Luckily, you’ve wound up here, and now you can learn everything you’ll need to know about what is a fixed (equity) indexed annuity, how it works, and be able to confidently keep track of what’s happening with your investment without the need of a middleman.

Equity Indexed Annuity Benefits

An annuity appeals to most people, having a nest egg for retirement is always a good idea and can be more than helpful when the time comes, but some don’t like the rate the interest most annuities have. For those that prefer the high-risk high-yield of the stock market a fixed indexed annuity gives you the best of both worlds, the security of a guaranteed principal and the high-yield benefits of a stock market index. If you believe your annuity can earn a better interest through stock market linked growth, a fixed indexed annuity is perfect for you.

Another feature that defines what is a fixed (equity) indexed annuity is the tax-deferred interest. Like all annuities, a fixed indexed annuity will be tax-deferred until you begin receiving payments, a feature that helps your annuity grow much faster. Indexing is also a fantastic feature that helps your annuity grow. The company you have the annuity with will carefully watch the stock market index, changing investment options as other companies and business gain or lose stock points. Mutual funds are a popular choice for the investment of annuities, and during your annuity’s growth period, you’re likely to wind up owning a small part of many different companies.

Understand Your Goals

By now you’ve come to an understanding of what is a fixed (equity) indexed annuity and how it can help you. Investing in a fixed indexed annuity isn’t for everyone, and if you prefer security over all else, a fixed annuity is the perfect choice for you. Keep in mind that the stock market index determines the interest your fixed indexed annuity will gain, which can be above or below the fixed interest on other annuities. Whichever annuity you choose, knowing what is a fixed (equity) indexed annuity will help you decide.

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