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Understanding fixed and indexed annuities

Two ways to protect savings and plan for income, and what to ask before you commit.

Fixed & Indexed Annuities

A contract built for the long term

An annuity is a contract with an insurance company that can grow over time and, if you choose, pay you income later.

What we explain

  • Fixed annuities
  • Fixed indexed annuities
  • Income options
  • Surrender periods and fees

Why people consider them

  • Tax-deferred growth
  • Options for income for life
  • Passing to beneficiaries without probate

Why it matters

Fixed or fixed indexed?

Both protect your value from market losses. They differ in how interest is credited.

  1. Fixed annuities

    Earn a set interest rate, declared by the insurance company, for a stated number of years. You know the rate up front, and your value is not tied to the stock market.

  2. Fixed indexed annuities

    Credit interest based partly on a market index, within a cap or participation rate. You are not invested in the market directly, and interest already credited is typically locked in.

  3. Caps and participation rates

    They limit how much interest you can earn from an index, and insurers can change them over time.

  4. Surrender charges

    Withdrawals above the free amount during the surrender period carry a charge, so an annuity suits money you can leave in place.

  5. Optional riders

    Features such as income riders can add benefits for an added fee, which can reduce your value.

Why people add an annuity

Three reasons an annuity may fit a plan

  1. Income for life

    Savings can be turned into a personal pension that pays you every month in retirement, through annuitization or an optional income rider.

  2. Tax-deferred growth

    You do not pay taxes on earnings until you start taking withdrawals, so your money can grow without yearly taxes on its gains.

  3. Legacy protection

    Remaining funds can pass directly to the beneficiaries you name, without going through probate.

At a glance

Fixed and fixed indexed, side by side

Fixed annuities compared with fixed indexed annuities
FeatureFixed annuityFixed indexed annuity
How interest is credited A set rate declared by the insurer for a stated periodLinked to a market index, within a cap or participation rate
When markets fall Not linked to the marketCredited interest for the period is typically zero, not negative
Growth potential Steady and predictableVaries with the index; it can end up higher or lower than a fixed rate
Things to check The rate guarantee period and the surrender scheduleCaps, participation rates, crediting method, rider fees and the surrender schedule

Our team

Meet who’s here

Licensed financial professionals, guided by WFG and WSB expertise, here to walk you through each step.

Meet the Full Team
  • Dr. June Magallanes

    Dr. June Magallanes

    CEO

  • Ms. Lorraine Go

    Ms. Lorraine Go

    Senior Marketing Director

  • Aileen Marie Mapalo

    Aileen Marie Mapalo

    Senior Marketing Director

  • Mary Carmel Elizon

    Mary Carmel Elizon

    Senior Marketing Director

  • Michael Damot

    Michael Damot

    Senior Marketing Director

  • Sheila Albelda

    Sheila Albelda

    Senior Marketing Director

FAQs

Answers to questions we hear often. They explain how things work; your own situation is worth a conversation.

Related services

  1. How are annuity earnings taxed?

    Earnings are generally not taxed until you withdraw them. Withdrawals are taxed as ordinary income, and withdrawals before age 59½ may face an additional federal tax.

  2. Can a fixed indexed annuity lose value?

    Index losses do not reduce your value: when the index falls, credited interest for that period is typically zero. Fees for optional riders and surrender charges on early withdrawals can reduce it.

  3. What is a surrender period?

    A set number of years during which withdrawals above a free amount carry a surrender charge. The charge usually steps down each year until it ends.

  4. What is an income rider?

    An optional feature that can provide income for life, usually for an added yearly cost.

  5. Why does the insurer matter?

    Annuity guarantees are backed by the financial strength and claims-paying ability of the issuing insurance company, so it is worth knowing how strong the insurer is.

  6. What should I ask before I commit?
    • How long is the surrender period, and what are the charges?
    • How much can I withdraw each year without a charge?
    • What are the cap and participation rates, and how can they change?
    • Are there optional riders, and what do they cost?
    • Might I need this money for something else in the next several years?

Talk it through with our team

For one-on-one questions, a Complimentary Financial Check-Up is a good place to start.

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Learn alongside others

Our financial literacy workshops are listed on our calendar, and organizations can request one of their own.

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Resources & tools

Free tools to see your numbers clearly

No sign-up, no cost. Enter a few numbers, answer a few questions, and get a clearer picture before you ever sit down with Dr. June.

  • Savings Calculator

    See how steady deposits and compound interest work together to grow your savings over time.

  • Debt Roll-Up Calculator

    Map out a debt snowball: clear one balance, then roll that payment into the next until every debt is paid.

  • Risk Profile Questionnaire

    Nine quick questions to help you understand your own comfort with financial risk, and your ability to take it.