Indexed Interest Potential

Fixed Indexed Annuity

The key to a successful retirement is a flexible strategy that assists your long-term goals. One valuable part of your strategy may be a fixed indexed annuity, or FIA.

Indexed Interest Potential

An FIA is an insurance product that provides a number of very helpful benefits. These benefits include:

Fixed indexed annuities provide a steady stream of payments based on the performance of an underlying index or indexes. FIAs are generally protected against principal loss. In this way, they differ from many other retirement income options. the case of a market downturn, you will not suffer losses.* However, when the market is up, you still have the potential for some growth. As a result, it’s possible for an FIA to generate for you income that you can’t outlive.

Another advantage of an FIA is that you have your choice of crediting method. With an annuity, your insurer determines how much indexed interest you will get based on certain rules and timeframes. It’s possible to choose credit applied annually, or monthly. Or, some crediting methods use the average value over a certain period of time. Others base their interest on the difference in rates. Yet another crediting method shows the changes in the index since the FIA contract began. One year later, the interest is calculated based on that change.

As previously mentioned, an FIA protects your principal, as well as “locks in” interest accrued. You are protected, regardless of what happens in the market. Although, the issuing insurance company is responsible for backing this guarantee. So, make sure you work with a reliable and trustworthy one.

seniors cozy on couch sipping mugs fixed indexed annuity dotson financial michigan

Growth Potential of a Fixed Indexed Annuity

Let’s first explain how annuity rates are determined. Start by aligning your annuity with at least one index. We can help you with this process. There are several options for interest rates when you use multiple different indexes. The insurance company will use a credit method to track the performance of your selected indexes. The policy provider then sets the interest rate at the end of each year. You will receive indexed interest earnings whenever the rate exceeds a certain point. Your money will be protected* if the market goes on a downward trend.

Could an annuity be the right option for you?

Everyone’s situation and strategy is a bit different. You can meet with us at Dotson Financial, so we can asses your situation and help you decide. Additionally, we can give you more information on FIAs and similar products. We believe that the more information you have, the better.

Factors that Impact Interest Rates of FIAs


An FIA may earn a maximum rate of interest. This is called a ceiling, or CAP. Basically, if your selected index exceeds the CAP, the interest rate does not apply.

Participation Rate:

The participation rate is calculated after the CAP. A percentage of the increase in the index sets your rate, rather than the full increase.


With some annuities, interest is calculated using a spread. Basically, the index deducts a percentage of interest as time passes. For example, let's say that the annuity spread increases by  4%, and the index increases by 9%, the annuity contract would receive a credit of 5% indexed interest.

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