Can I lose money if the market drops?
It depends on the type. Fixed and fixed indexed annuities protect your savings from market drops. Variable and index-linked annuities can lose money.
The fair worry
You want your money to grow, and you don't want to watch it fall. I'd want both too.
The answer
A fixed annuity earns interest at a rate the insurer sets.
Fixed indexed annuities link interest to a market index. A down year earns nothing without cutting your savings.
You won't get the index's full growth. Caps and other limits hold gains down. Some contracts let insurers change them.
Variable annuities, though, can lose everything you put in. Index-linked annuities, called RILAs, can lose money too, usually with a loss limit.
The downside
Early withdrawal charges can cut your savings. Guarantees depend on the insurer's ability to pay.
At your consultation
On your free Zoom consultation, your retirement advisor puts that tradeoff beside YOUR needs.
More questions on this topic
- Will I lose access to my money?Yes, an annuity can limit access. Some charge for early withdrawals. Turning money into lifetime payments generally means giving up control.
- How long is my money tied up?Often 5 to 10 years, sometimes longer. Even then, you can generally take some out each year, and shorter terms may be available.
- What happens to the money when I die?The contract and payment choice decide. Some keep paying a spouse. Others may pay little or nothing after you die.