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How they work: FIAs offer principal protection from market losses and the potential for growth through index funds. Some FIAs combine indexes, providing exposure to different asset classes, while others mirror a specific index like the S&P 500. Participation rates determine the portion of earnings you retain, and even with a participation rate below 100 percent, FIAs still offer benefits by avoiding downside risk.
Analyzing your options: When searching for a good FIA fit for you, consider the duration, participation rates and cap rates offered by insurance companies. Further, while reviewing illustrations provided by insurance companies, pay attention to the worst-case scenarios and the performance of annuities during the past two decades. Comparing annuity potential based on the worst 10-year run can provide a more realistic perspective.
If you’ve turned away from annuities in the past, it might be time to re-evaluate. You’re living longer, and adding an annuity to your retirement income plan could help bring the financial peace of mind you’re searching for.