Fixed Indexed Annuity Calculator
Project a fixed indexed annuity year by year from index returns with its cap rate, participation rate, spread and 0% floor, and compare the credited value with investing in the index directly.
How it works
Credited rate each year = min(cap, max(floor, index return × participation rate − spread)) · value = premium × Π(1 + credited rate) · index value = premium × Π(1 + index return)
A fixed indexed annuity credits interest linked to a market index (often the S&P 500 price index) but never loses value from a market fall: a negative year is credited at the floor, usually 0%. In exchange, the insurer limits the upside with a cap rate, a participation rate or a spread — a 9% cap means a 22% index year only credits 9%. Index price returns exclude dividends, so the comparison here flatters the index slightly less than real total returns would. Surrender charges, rider fees and rate resets are not modelled.
Worked example
A 100,000 premium with a 9% cap, 100% participation and 0% floor, over index returns of 12, −8, 15, 5, 22, −3 and 9%, is credited 9, 0, 9, 5, 9, 0 and 9%. It grows to 148,216 (an average 5.78% a year) versus 160,491 in the index; the cap limited 3 years and the floor protected 2.
Sources: FINRA — The complicated risks and rewards of indexed annuities · Investor.gov (SEC) — Updated Investor Bulletin: Indexed Annuities
Frequently asked questions
How does a cap rate work on an indexed annuity?
It is the most the annuity can credit in a period. With a 9% cap, an index gain of 5% credits 5% but a gain of 22% credits only 9%.
What is the participation rate?
The share of the index gain that is credited before the cap. With 80% participation, a 10% index gain becomes 8%. Some contracts use participation with no cap instead.
Can I lose money in a fixed indexed annuity?
Not from index losses — the floor (usually 0%) protects the credited value. You can lose money through surrender charges if you withdraw early, and rider fees reduce the value.
Are dividends included?
No. Most indexed annuities use the index’s price return, which excludes dividends of about 1.5%–2% a year on the S&P 500, one reason they usually trail the market over long periods.
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Educational estimate, not investment, trading or tax advice. Brokers, issuers and data providers use their own conventions, fees and figures — confirm with your broker, the issuer’s documents or a licensed adviser before acting.