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Of the many types of annuities available to the consumer, Fixed Index Annuities (FIAs) are currently the most popular for agents to pitch. Maybe it’s because long surrender charge indexed annuities pay a high commission. Maybe it’s the “too good to be true” story that agents and advisors often use to sell and promote the product.

Maybe it’s the “one size fits all” approach that is, unfortunately, part of the sales pitch. Regardless of the reason, the truth is that FIAs are fixed annuities issued by a life insurance company and designed and introduced in 1995 to compete with CD returns. Yes...CD returns!...not the market growth dreams and non-guaranteed proposal numbers that a lot of people are unfortunately believing and buying.

I don’t dislike Fixed Index Annuities (FIAs), I just hate that way that too many agents choose to promote and sell them. FIAs are good CD principal protection strategies that are also an efficient delivery system for attached Income Rider guarantees. They are NOT market return products. In fact, FIAs are not classified as a security. It’s a fixed annuity that’s issued by a life insurance company and regulated at the state level.

Below are some of the benefits that Fixed Index Annuities provide:

  • No annual fees
  • Gains grow tax-deferred in a non-IRA account
  • Index option choices can be changed
  • 100% principal protection
  • Gains permanently locked in on the contract anniversary date
  • Guaranteed Minimum Return
  • Potential to outperform CDs & MYGAs (not the stock market)
  • Penalty-free withdrawal options
  • Income Riders can be attached for future lifetime income needs
  • Some attached Income Rider benefits provide Confinement Care
  • Some attached Income Riders provide a contractual death benefit
  • Can be converted to a SPIA for lifetime income guarantees
  • Can be used in an IRA, Roth IRA, or non-IRA account

The limitations of Fixed Index Annuities primarily revolve around the complexity of the product. The potential returns are typically based on a call option on the S&P 500 (or another index), with upside limitations (aka caps/spreads) on any gains earned. Currently, there are over 700 index call options to choose from with over 40 index choices. Some of those index choices are made up out of thin air by the carrier after they back-test for a favorable return scenario. Confused? You should be. That’s why you need to speak one-on-one with Stan The Annuity Man before buying any Fixed Index Annuity(FIA)

In addition to finding a Fixed Annuity Calculator (MYGA) on The Annuity Man website, we also offer a proprietary Fixed Indexed Annuity Calculator (FIA) as well. Both MYGAs and FIAs are considered a fixed deferred annuity. Unlike variable annuities that can lose value with market volatility, MYGAs, and Fixed Index Annuities (FIAs) fully protect your principal.

Fixed Index Annuities (FIAs) offer a potential index call option return (i.e. cap rate on the S&P 500) and contractually provide a guaranteed minimum interest rate. These are 2 separate calculations from a policy standpoint and for illustration purposes. If your retirement plans also include contractually guaranteed retirement income for life, then you can choose to add an Income Rider contractual benefit to the policy at the time of application. With FIAs, you can fund the policy with a lump sum or add money over time (with some policies). This funding flexibility is an attractive feature the most annuity types don’t provide.

The way we at The Annuity Man primarily use FIAs is to deliver the Income Rider guarantees for future lifetime income. When someone wants an “Income Later” quote, we use our proprietary annuity calculators to run Income Riders and Deferred Income Annuities (DIAs). Those are the two annuity strategies that contractually solve for future pension type income needs. Sometimes Income Riders have the highest number, and sometimes DIAs have the highest number. We quote both strategies and ALL carriers to find the highest contractual guarantee for your specific situation and goals.

We also like FIAs because they fully protect your principal and any index option gains are permanently locked in on each contract anniversary date (with most FIA structures). FIAs also work well in conjunction with MYGAs (Multi-Year Guarantee Annuities) to create a fixed annuity strategy ladder. MYGAs are the annuity industry’s version of a CD, and FIAs are CD type products as well. Both FIAs and MYGAs provide full principal protection, and FIAs without attached riders have no annual fees. Remember that FIAs are commodity products and should be shopped with all carriers. There is not one FIA that is better than the other...according to Stan The Annuity Man.

With Fixed Index Annuities, we would encourage you to seek investment advice from a qualified professional that will tell you the truth about FIAs. Remember that if the FIA sales pitch sounds too good to be true, it is without exception. Stan The Annuity Man will tell you the brutal truth about Fixed Index Annuities and make sure you fully understand the strategy before moving forward. No pressure. No bad sales pitches. Just the facts about the contractual guarantees within the policy.

Before you buy a Fixed Index Annuity, you need to fully understand the benefits and limitations before making a decision. Let us send you for free and under no obligation our FIA Owner’s Manual so you can establish a foundation of knowledge to make an informed decision on your terms and time frame.

You also need to schedule a call with Stan The Annuity Man himself to have a full discussion so you can make an informed decision on your terms and time frame.