If the index goes up, you receive a portion of the upside. There are three basic types of crediting methods.

How do fixed index annuities make money?

Insurance companies use crediting methods to calculate how much interest your money has earned each year. In most cases, you get to select the method, or combination of methods, that you feel will work best for you.

How Do Fixed Annuity Companies Make Money? -

Each year, you can make changes to how your money is allocated per crediting method. This provides you the ability to adjust your annuity portfolio, which, in certain market conditions, may be advantageous.

This crediting method credits your annuity account the interest that is earned on market gains over the course of a day period. You receive all of the index return up to whatever annual cap is specified in your contract.

If the index goes down over the course of the year, your account value loses nothing.

How do annuities make money?

Then, all 12 monthly percentage returns are added up. If its performance is negative you will not face a loss; you simply would not register a return for that year. Click here for instant access to Video 1!

At the end of each month the index value is recorded. This determines the average monthly value for the year. That value is then divided into the start value of the index to determine the annual return.

For example, if the market started at 10, and the monthly average for the year was 12,, the annual return would be 8. Depending on the insurance company, there can be a cap or spread, which may limit your participation in any gains.

Annuity product guarantees rely on the financial strength and claims-paying ability of the issuing insurer. Fixed index annuity and retirement income planning experts serving Dallas, Fort Worth, Arlington Texas.

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