Can a fixed index annuity help protect against sequence of returns?

A husband and wife embrace while looking happily forward.

People typically think of the average rate of returns when it comes to sustaining their retirement income.  However, what might be more impactful is not the average return, but the order of returns.

Take, for example, the case of George and Jane. Both have $500,000 saved for retirement. George retires and begins taking withdrawals in 1998. Jane then retires in 2000 and begins to take the same amount in withdrawals as George. You would expect that both would have an equal depletion of their assets and run out of money two years apart, but because of sequence of returns, this is not the case.

21 years later, with just a difference of two years from when withdrawals started, George still has over $100,000 while Jane’s account is depleted by year 15.

 To help mitigate the risk of potentially outliving retirement savings, a fixed index annuity (FIA) might be an option. FIAs can offer a balance of both protection from market downturns and growth potential.

A balancing act

With so many potential hurdles and uncertainty, some may want to find a retirement income planning product that helps balance the need for stability and provides growth potential.

FIAs can offer both. A fixed index annuity has the potential for interest to be credited based in part on the performance of specific indices, without the risk of loss of premium due to market downturns. Some key features of FIAs are:

Annual reset

An annual reset feature  locks in interest credits annually, meaning gains cannot be lost due to market decreases. The “annual” reset feature applies to credit terms that span one year. For terms longer than a year, the reset feature coincides with the length of the term. This feature helps both in growing and in protecting your retirement nest eggs; not only will they not lose accumulation value from market downturns, but the new starting point for future growth calculations is the lower index value.

Financial stability

 Fixed index annuities are designed to provide reliable lifetime income. Comparing FIAs to other popular retirement planning options, we see that it is on the lower end of the risk spectrum. Premiums cannot be lost due to a market downturn. Adding a fixed index annuity can serve to complement many retirement portfolios, including those on the higher side of the risk spectrum because they offer protection from market downturns and growth potential.

Fixed index annuities are an attractive option for many looking to add stability to their retirement income plans. Not only can a FIA offer growth potential, it can also provide protection from market downturns. If you think you may benefit from a fixed index annuity, explore our FIA information page.


 Sammons® Financial Group, Inc.’s member companies, including North American Company for Life and Health Insurance®. Annuities and life insurance are issued by, and product guarantees are solely the responsibility of, North American Company for Life and Health Insurance.

Fixed index annuities are not a direct investment in the stock market. They are long-term insurance products with guarantees backed by the issuing company. They provide the potential for interest to be credited based in part on the performance of specific indices, without the risk of loss of premium due to market downturns or fluctuation. Although fixed index annuities guarantee no loss of premium due to market downturns, deductions from your accumulation value for additional optional benefit riders could under certain scenarios exceed interest credited to the accumulation value, which would result in loss of premium. They may not be appropriate for all clients. Interest credits to a fixed index annuity will not mirror the actual performance of the relevant index.

This information is provided for general reference purposes and should not be viewed as investment advice or as a recommendation for a specific allocation. Neither North American, nor any agents acting on its behalf should be viewed as providing legal, tax or investment advice. Always consult with and rely on your own qualified advisor.

This allocation provides the potential for interest to be credited based in part on the performance of the index without risk of loss of premium due to market fluctuations.

The “S&P 500®” and “DJIA®”, Indices (“Indices”) are products of S&P Dow Jones Indices LLC or its affiliates (“SPDJI”) and have been licensed for use by North American Company for Life and Health Insurance® (“the company”). Standard & Poor’s® and S&P® are registered trademarks of Standard & Poor’s Financial Services LLC (“S&P”); Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC (“Dow Jones”); and these trademarks have been licensed for use by SPDJI and sublicensed for certain purposes by the company. Products are not sponsored, endorsed, sold or promoted by SPDJI, Dow Jones, S&P, or their respective affiliates and none of such parties make any representation regarding the advisability of investing in such product(s) nor do they have any liability for any errors, omissions, or interruptions of the Indices.

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