Fixed indexed annuities are insurance products designed to provide individuals with a combination of principal protection, growth potential linked to market indexes, and the option for guaranteed lifetime income. They are a type of deferred annuity, meaning that funds are typically deposited over time or in a lump sum, and payouts begin at a future date, often during retirement.

Here's how fixed indexed annuities work and some key features:

1. Principal Protection: One of the primary features of fixed indexed annuities is principal protection. This means that the initial investment (premium) is protected from market downturns and losses. Even if the underlying market indexes perform poorly, the annuity contract guarantees that the principal amount will not decrease due to market volatility.

2. Index-Linked Growth: Fixed indexed annuities offer the opportunity for growth based on the performance of selected market indexes, such as the S&P 500, Dow Jones Industrial Average, or others. The annuity's interest crediting is tied to the performance of these indexes, allowing for potential higher returns compared to traditional fixed annuities, which offer a predetermined interest rate.

3. Interest Crediting Methods: Insurance companies offer various interest crediting methods for fixed indexed annuities. Common methods include annual point-to-point, monthly sum, monthly average, and cap rates. These methods determine how the annuity's interest is calculated based on changes in the selected index(es).

4. Guaranteed Minimum Interest Rate: Despite being linked to market indexes, fixed indexed annuities typically have a guaranteed minimum interest rate. This ensures that even if the market indexes perform poorly or the chosen interest crediting method results in minimal growth, the annuity will still earn at least the guaranteed minimum rate of interest.

5. Tax-Deferred Growth: Like other annuities, fixed indexed annuities offer tax-deferred growth. This means that earnings within the annuity grow tax-free until withdrawals are made. This feature can be advantageous for retirement planning, allowing funds to potentially grow faster compared to taxable investments.

6. Income Options: Fixed indexed annuities often include optional riders or features that provide guaranteed lifetime income. These income options can be activated at a specified age or upon retirement, providing a steady stream of income for the annuitant's lifetime, regardless of market fluctuations.

Typical candidates for fixed indexed annuities include:

• Individuals nearing retirement or in retirement who seek principal protection, growth potential, and guaranteed income.

• Investors looking for a conservative investment option with some exposure to market indexes while preserving capital.

• Those seeking tax-deferred growth and potential for higher returns compared to traditional fixed-rate investments.

• Individuals who value the option for lifetime income and want to supplement other retirement income sources.

Fixed indexed annuities can be complex financial products, and it's essential for individuals considering them to carefully review the terms, features, costs, and potential risks. Working with a knowledgeable financial advisor or insurance professional can help individuals understand whether fixed indexed annuities align with their financial goals, risk tolerance, and retirement planning needs. It's crucial to consider factors such as surrender charges, liquidity, inflation protection, and contract terms before purchasing a fixed indexed annuity.