Since the election of Donald Trump the stock market has had an incredible run up. Regardless of your political views the facts are the facts and your money and wealth don’t really care who is president. Our job is to play the cards as they are dealt regardless of who is in charge at the White House.

The old saying is in play, “what goes up is sure to come down” unless we take steps to lock in our gains and protect against future loss. If you are in mutual funds you have no doubt experienced the ups and downs of the market. Many people think that’s just the way it is, and to some extent they are correct. However, there is no law that says you have to play by those rules with your money.

There are strategies that allow you to participate in most of any market gains but none of the market losses. You can accomplish this through a strategy called indexing. One of the most popular ways to practice indexing is through the product of a fixed indexed annuity.This is one of three major classes of annuities (with thousands of products between hundreds of companies available) with the other two classes being a fixed annuity and a variable annuity.

A fixed annuity will guarantee your money against any downside and promise to pay you more than you will be able to get at a bank.Now many fixed annuities are paying 2.75% to 3.25% depending on the actual terms and carrier offering the annuity.The upside is you know you will never lose money and that your money will grow every year regardless of what the stock market does.The downside is that during large run ups, like we are currently experiencing, your account will not experience the big run ups but rather a much smaller gain. There are also early withdrawal fees for pulling money out of the annuity early (this will be true for every class of annuity so be sure that you understand how much and how long those penalties exist).  Fixed annuities can be a great play for very conservative investors who want protections but need more return than a savings account or CD’s at the bank.

A variable annuity will track the stock market and its ups and downs. Many will have floors and ceilings as far as how much you can lose or how much you can make. Being as these are generally heavily traded accounts the fees associated to variable annuities are usually greatest of the three classes of annuities.The variable annuities are for more aggressive investors who believe the carrier can do better with their money than they can personally and are aware of the fees and penalties for early withdrawal.

A fixed indexed annuity will be a kind of hybrid between the other two classes.Your principal balance will be protected against any downside loss and your upside will be determined by tracking of an index. (Many indexes are available but most are tied to the stock market performance in some way) When the indexes go up your account will be credited accordingly and many accounts have caps for how much you can make in a year and others don’t have caps on profits. If they don’t have a cap on profits they will generally have a “spread” which determines how much of total index gain you receive minus the spread. A simple example is the index has a 10% run up but there is a 2% spread on the product. This means your account is credited 8% of gain that year. Your index level is now locked in and the next year “resets” as far as gain or loss.If the index comes down 10% the next year your money will not go down at all but will also not go forward at all either.In short, when markets go up you participate at some level in the ups but never in the downs of the market.

With many of these annuities you can also add a lifetime income rider on top of the base contract. These riders will usually guarantee that your eventual income you start drawing out of the account (kind of like your own private pension) will be guaranteed no matter how long you live regardless of what happens to the cash in the account. So if you live to be a ripe old age you will receive the agreed upon income amount until your death. If you pass away and there is still money in the account verify that your particular product has a death benefit that would assure any remaining monies go to your loved ones. The income rider will come with an annual fee but will usually guarantee your income rider value will rise every year even if your cash does not increase. In short, your eventual income increases every year regardless if your cash does or not that year.