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Learn and Plan | Fixed index annuities and sequence of returns
late 50s couple discuss fixed annuities over coffee

Fixed index annuities and sequence of returns

Sunday 31 May 2020 | Reading Time: 4 minutes

One of the concerns facing retirement income may be the sequence of returns. Market losses that occur during retirement can have a lasting impact on retirement funds. When it comes to sustaining retirement income, people often place importance on the average rate of return. However, what might be more impactful is not the average return, but the order of returns.

Take, for example, the case of George and Jane. Both have $500,000 saved for retirement. George retires and begins taking withdrawals in 1998. Jane then retires in 2000 and begins to take the same amount in withdrawals as George. You would expect that both would have an equal depletion of their assets, but because of the sequence of returns, this is not the case.  21 years later, with just a difference of two years from when withdrawals started, George still has over $100,000 while Jane’s account is depleted by year 15.

George and Jane sequence of returns graph

To help mitigate the risk of potentially outliving retirement savings, a fixed index annuity (FIA) might be an option. FIAs can offer a balance of both protection from market downturns and growth potential.

Balance of protection from market downturns and growth potential

While one can’t predict what the market will do, a fixed index annuity (FIA) can offer a balance of protection from market downturns and growth potential. Using FIAs, there is the potential for interest to be credited based in part on the performance of specific indices, without the risk of loss of premium due to market downturns.  

In addition, FIAs can help with concerns about depleting funds because of some of the products specific features such as:

Annual reset

An annual reset feature of many FIAs locks in interest credits meaning gains cannot be lost due to market decreases. The “annual” reset feature applies to credit terms that span one year. For terms longer than a year, the reset feature coincides with the length of the term. This feature helps both in growing and in protecting your retirement nest eggs; not only will they not lose accumulation value from the downturn, but the new starting point for future growth calculations is the lower index value.

Financial stability

Fixed index annuities are designed to provide reliable income that can last for as long as a person chooses. Comparing FIAs to other popular retirement planning options, we see that it is on the lower end of the risk spectrum. Premiums cannot be lost due to a market downturn. Adding a fixed index annuity can serve to complement many retirement portfolios, including those on the higher side of the risk spectrum because they offer protection from market downturns and growth potential.

For many fixed index annuities may be an attractive addition to their portfolio to help mitigate the concern regarding the sequence of returns or to help achieve retirement goals. To find out more about FIAs, visit our page to find in-depth learning materials to help better understand fixed index annuities.


Sammons® Financial Group, Inc.’s member companies, including Midland National® Life Insurance Company. Annuities and life insurance are issued by, and product guarantees are solely the responsibility of, Midland National Life Insurance Company.

Fixed index annuities are not a direct investment in the stock market. They are long-term insurance products with guarantees backed by the issuing company. They provide the potential for interest to be credited based in part on the performance of specific indices, without the risk of loss of premium due to market downturns or fluctuation. Although fixed index annuities guarantee no loss of premium due to market downturns, deductions from your accumulation value for additional optional benefit riders could under certain scenarios exceed interest credited to the accumulation value, which would result in loss of premium. They may not be appropriate for all clients. Interest credits to a fixed index annuity will not mirror the actual performance of the relevant index.

This information is provided for general reference purposes and should not be viewed as investment advice or as a recommendation for a specific allocation. Neither Midland National,

nor any agents acting on its behalf should be viewed as providing legal, tax or investment advice Always consult with and rely on a qualified advisor.

This allocation provides the potential for interest to be credited based in part on the performance of the index without risk of loss of premium due to market fluctuations.

The “S&P 500®” and “DJIA®”, Indices (“Indices”) are products of S&P Dow Jones Indices LLC or its affiliates (“SPDJI”) and have been licensed for use by Midland National® Life Insurance

Company (“the company”). Standard & Poor’s®and S&P® are registered trademarks of Standard & Poor’s Financial Services LLC (“S&P”); Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC (“Dow Jones”); and these trademarks have been licensed for use by SPDJI and sublicensed for certain purposes by the company. Products are not sponsored, endorsed, sold or promoted by SPDJI, Dow Jones, S&P, or their respective affiliates and none of such parties make any representation regarding the advisability of investing in such product(s) nor do they have any liability for any errors, omissions, or interruptions of the Indices.

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