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I’m considering a Fixed Indexed Annuity (FIA) as a short-term parking spot for part of my money—only for 3 years with a guaranteed 6% return, not a lifetime annuity play. There is no management fee, only surrender fees if taken before the 3-year mark.
For those who’ve used an FIA this way (or evaluated it and passed), what were your results and your takeaways?
What should I watch most closely—surrender charges, cap/spread/participation rates, renewal risk, crediting method, riders/fees, liquidity, and how it compares to CDs/T-bills/bonds for that time window?
Thanks – Jeff
Jeff, I agree with Dan – 6% seems pretty high given where interest rates are today. I’ve used FIAs as substitutes for CDs or Treasuries so the concept is valid. But 6% for 3yrs raises a red flag. Anytime an institution has to pay a higher rate to attract money, their credit worthiness comes into question. As the adage goes, “Measure twice cut once”, seems appropriate so do your due diligence first. Good luck
Hmm, interesting. Would you please link to the specific product?
I’m a newbie to FIAs, but after a few minutes of research it seems the floor is typically in a 0-1% range.
6% guaranteed for 3 years, with only a 3 year surrender period sounds too good to be true. Perhaps 2% each year for 3 years. Never have I seen a deal like that. There has to be some small print.
Unlike most HDers, I am not anti FIA, as I think they can be a decent alternative to a CD. However, I’m skeptical about this one.
6% sounds like a decent annual return. What’s the financial rating of the provider? and how are the gains taxed, as capital gains or ordinary income? It might make a difference to the headline return. And just to be sure, it’s definitely 6% annually and not total return over the term?