An indexed annuity (also called a fixed indexed annuity or FIA) is a contract with an insurance company that credits interest based on the performance of a market index (such as the S&P 500) while protecting your principal. If the index goes down, you earn 0% — your principal is protected.
Key Points
- Indexed annuity: interest linked to market index performance
- Principal is protected — cannot lose money
- If index goes up: earn a portion of the gain (subject to cap/participation rate)
- If index goes down: earn 0% — principal protected
- Tax-deferred growth