Minimize Market Risk with a Fixed Index Annuity
by Hersh Stern - Revised Friday, October 9, 2026
Do you want to participate in the market without the risk to your investment principal? It really is possible, and I'll explain how.
Let's first address a problem you may be forced to endure -- low interest rates. In today's financial climate, you would be lucky to earn a 1 percent to 2 percent interest rate on your money. It seems as if there is no place else to go without putting your money at risk.
And based on the extreme volatility of the stock market during the past several years, why would you want to take that risk?
Fortunately, you now have an alternative to low interest rates. Today, it's possible for you to reap the upside of the stock market without enduring the downside risks.
Introduced in 1995, fixed index annuities are now the best choice if you are looking for better gains, safety and guarantees with no downside risk to your principal. You can see examples of these annuities in the chart below. The surrender is the amount of years before you can withdrawal funds without receiving a surrender charge. Click on the chart for more information.
How the Fixed Index Annuities Work
These annuities typically mirror the performance of a stock index or indexes, such as the S&P 500, the Nasdaq Composite and the Dow Jones Industrial Average.
Fixed Index Annuity Rates
For example, the S&P 500 Index is often regarded as the standard for broad stock market performance. It is used to measure the average stock price changes of the 500 most widely held companies representing more than 100 specific industry groups. Historically, the S&P 500 Index has consistently outperformed fixed-interest products such as corporate and government bonds and CDs.
Your credited rate is calculated from the growth in the S&P 500 Index, subject to a cap, from the start to the end of each of your crediting periods. The current caps range from around 7 percent to 12 percent. Earnings are generally credited to your annuity annually.
Why a cap? Consider, would you take a little less to protect yourself from the downside? For example, if the S&P 500 were to go down by 28 percent, you would not receive a loss. Your annuity would instead not be credited with any interest.
Is there any question that you as an annuity purchaser would have been very happy with 0 percent from 2008 to 2011 when the market was down all three years?
You can enhance your long-term cash accumulation and retirement income options with the Fixed Index Strategy. If you are looking for safety of principal, a minimum guaranteed interest rate, and the potential for double-digit returns, then the fixed index annuity may be the right choice for you.
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