Annuity basics: Is an indexed annuity right for you?

A couple who is figuring out if an indexed annuity is right for their retirement income plan.

Indexed annuities offer the best of both worlds—the opportunity for additional growth without the risk of losing your premium. Learn more about them and see if they could benefit your long-term retirement investment strategy.

Benefit from market growth, without the risk of losing your premium

An indexed annuity is a type of fixed annuity. It’s an insurance contract that gives you the opportunity to participate in potential market growth, while also protecting your original premium.

Here’s how it works:

  • You purchase an indexed annuity.
  • Your money has the opportunity to grow, based on the performance of an equity index like the S&P 500®. There’s the possibility you won’t earn anything, but you’ll never lose money—your premium is protected from market losses.
  • Any gains to your money grow tax-deferred until you start taking income from the annuity.

Get the best of both worlds

One of the big draws of annuities is that they can guarantee income for life. But indexed annuities offer an additional advantage—an opportunity for investment growth without risk of losing your premium. This can help you keep pace with inflation and help ensure your income payments support your lifestyle for as long as you need.

Access your money

Some indexed annuities allow free annual “surrender amounts” that you can withdraw if unexpected expenses arise. There are also qualifying events, like a terminal illness or becoming disabled, which may allow a withdrawal.

Decide if an indexed annuity is right for you

Consider an indexed annuity if you want to:

  • Potentially grow your money without risk of losing your premium. Take advantage of market growth opportunities while keeping your premium safe.
  • Enjoy tax-deferred growth on your investment (and earnings) while you save for the future. You don’t pay taxes on your earnings until you take a withdrawal or receive an income payment. This makes an indexed annuity  ideal if retirement is still a few years off (or longer), or if you’re retired and don’t need income payments right away.
  • Provide for your loved ones when you’re gone. Indexed annuities generally include death benefit protection. Your beneficiary may receive unused funds when you die.

Learn more about indexed annuities

Guarantees are based on the claims-paying ability of Principal Life Insurance Company.

This document is intended to be educational in nature and is not intended to be taken as a recommendation. Consult with your financial professional to discuss retirement planning.

Annuity products and services are offered through Principal Life Insurance Company, a member company of Principal, Des Moines, Iowa 50392.

Principal and symbol design and Principal Financial Group are trademarks and service marks of Principal Financial Services, Inc., a member of the Principal Financial Group.