What is a Fixed Index Annuity?

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A financial advisor with more than three decades of experience, Nick Yekani serves as president of Economics & Family, Inc., in Woodland Hills, California. Throughout his career, Nick Yekani has become well-versed in a variety of financial products, including fixed index annuities.

Offering a guaranteed rate of interest and a high degree of safety, a fixed index annuity is a tax-favored savings option offered by insurance companies. In recent years, the popularity of these products has grown significantly, leading to record-setting sales numbers.

The reason that many investors are attracted to fixed income annuities is that they offer guaranteed growth. Unlike variable annuities, the principal on fixed annuities will not decline when the stock market does. Instead, the principal fluctuates according to a formula based on the change in the value of a stock market index, typically the Standard & Poor's 500.

Other benefits of fixed income annuities include tax-deferred earnings, principal protection during market downturns, and higher interest rates than bank CDs and other annuities. FIAs can also be an attractive option for those looking to create a probate-free inheritance or retire early without penalty.

IRA Rollover Rules

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Backed by more than three decades in the financial service industry, Nick Yekani presides over Economics & Family, an advisory firm focused on financial planning and education. In this role, Nick Yekani advises clients on their retirement saving options, including strategic IRA rollovers.

At some point, many IRA account holders will have to roll over their balance from one brokerage to another. However, there are many regulations limiting how this process can be carried out. For example, while traditional IRAs can be rolled over into multiple types of retirement accounts, Roth IRAs can only be rollover into another Roth IRA account.

Further, some types of rollovers can trigger a tax liability. In an indirect rollover, the account holder is presented with a check minus a percentage paid to the IRS. However, this amount must be replaced by the account holder when depositing into a new IRA account so that the new account has the same value as the previous one. The check must be deposited in a new account within 60 days.

The IRS also stipulates that certain rollovers can only be carried out once in a 12-month period. Converting from a traditional IRA to a Roth or changing the brokerage for an employer-sponsored plan are exempted from this limitation.