What Is an Equity Indexed Annuity?

By Brent Meyer — SafeMoney.com Founder & Editor Reviewed by Licensed Financial Professionals  |  SafeMoney.com — Trusted Since 2011  |  Updated Regularly Quick Answer: Discover equity indexed annuities as safe money alternatives for retirement. Learn more and explore your options today at SafeMoney.com. Related Articles Indexed Annuity Floor | Annuity Guide Indexed Annuity Differ From Variable Annuity What Is An Annuity | Annuity Guide Annuity Options Explained | Annuity Guide Key Takeaways Equity indexed annuities offer growth potential linked to stock market performance while providing downside protection. These annuities can be a safe money alternative for retirement planning. Consider using retirement calculators to assess your financial needs. Consult a SafeMoney certified advisor for personalized retirement strategies. Equity indexed annuities combine features of fixed annuities and market-linked investments for balanced growth. Quick Answer An equity indexed annuity, now known as a fixed indexed annuity, is a safe money alternative that credits interest based on a financial index, offering growth potential with principal protection. SafeMoney Editorial Team  |  Reviewed by Licensed Financial Professionals  |  Updated Regularly Understanding Fixed Indexed Annuities Fixed indexed annuities, formerly known as equity indexed annuities, are designed to offer retirement savers a balance between growth potential and principal protection. These products emerged in the mid-1990s as alternatives to low-interest CDs and other fixed-interest instruments. How Fixed Indexed Annuities Work Fixed indexed annuities earn interest based on the performance of a chosen financial index. When the index rises, a portion of that growth is credited to the annuity's contract value. If the index falls, no interest is credited, but the principal remains protected. This mechanism provides a safeguard against market downturns. Feature Fixed Indexed Annuity Principal Protection Yes Interest Crediting Based on Index Performance Growth Potential Higher than Traditional Fixed Annuities Regulation State Insurance Commissioners Choosing the Right Index While the S&P 500 is the most popular index used in fixed indexed annuities, many contracts now offer other indices that focus on specific sectors such as healthcare or real estate. These options allow retirement savers to align their annuity with their financial goals and market outlook. Frequ