In "normal" stock market investing, the range of outcomes is unlimited in terms of gains and losses. For those who would rather reduce the volatility and eliminate or reduce stock market risk, there are a number of types of structured products that create a predetermined set of outcomes. For our purposes here, we will focus on the structured outcome contracts offered within the new, liquid, index-linked annuities (FIAs and RILAs).
When using a FIA (fixed index-linked annuity), one's investment is linked to a stock market index. Gains are credited at the end of a term if the price of that index increases. One's funds are not actually invested into the stock market itself. While there are variations, in most cases, if the price index goes up, your account is credited with 100% of the gain, usually up to a maximum or "cap." That new value becomes principle and can't be lost in subsequent years. Future gains compound on any previous gains. Conversely, if the stock market price index declines -5% or -25% or more in a contract year, your account won't lose. In exchange for the downside protection, most contracts have a "cap" or maximum gain. Currently,* the highest caps for FIA contracts linked to the S&P 500 price index are in the 10%-12%/year range^ depending on amount deposited. The current highest caps for contracts linked to a world index have potential gains of 12% to 14%.* There are also index-linked contracts with no cap that work a bit differently than simply tracking a standard index.
A similar investment called a "RILA," (registered index-linked annuity), offers contracts with a potential for greater gain. Those contracts use "buffers," "floors," and/or "participation rates" to reduce or eliminate potential losses from stock market declines. These differ from FIAs in that these contracts may lose value.^*
FIAs and RILAs allow investors to profit when major stock market indexes rise while providing full or partial protection from downside losses. Multiple allocations to different indexes may be made in the same account to create diversification. These contracts are issued by some of the largest financial institutions in the country.
FIAs have no upfront charges and the basic contracts have no yearly fee. In my practice, most all the FIAs issued are fully liquid with no early withdrawal penalties.^ RILAs also have no upfront charges and most of the RILAs I offer in my practice are fully liquid with no early withdrawal penalties and no internal fees.^* There are certain suitability guidelines that must be met. Not all investors are candidates for a FIA or RILA. Please read all product materials and the prospectus if applicable.
Below is an easy to understand analysis of S&P 500 price returns since 1928. Please read to understand the power of today's structured outcome FIAs and RILAs. These are not old style annuities that tie up your money with high internal fees. These are investments that fill the demand for lower risk vehicles that have the potential for significant returns and may, over certain market cycles, beat the indexes due to their ability to eliminate or reduce losses in down years.
*As of 06.24.2026;
^Terms describe Mass Mutual Ascend's form IP-5 contract. For normal withdrawals greater than 10% of the account value during the first 5 years of the account, there may be a postive or negative "market value adjustment" depending on interest rate fluctuations. There is no backend early surrender fee. See policy disclosures for details.
^*Terms describe Mass Mutual Ascend's form IAA contract. For normal withdrawals greater than 10% of the account value during the first 6 years of the account, there may be a postive or negative "market value adjustment" depending on interest rate fluctuations. There is no backend surrender fee. See policy disclosures for details.
FIAs and RILAs are backed by the financial strength and claims paying ability of the issuing insurance company.
Since a FIA orRILA credits gains when the price of the chosen stock market index increases in value during the contract year, it makes sense to wonder how often the most used index, the S&P 500*^, goes up during 1 year periods. Since 1928, the price index has increased in 68 of 98 years (69%). Returns of 11% or better have occurred in 49 of those years (50%) and 7.06% or better in 9 of those years. So, in 59% of the years, the index has increased 7.06% or better.*
Using rolling 7 year periods, of which there now have been 91, the index has experienced the following:
While one can't make predictions of future returns or crediting rates, if the next 7 years were "average," an FIA with a point to point crediting method and a 12% yearly cap, would return 12% in 3 or 4 of the years and 7% or better in 1 or 2 of the years. In 2 or 3 of the years, the price index would be negative and your account would experience no stock market loss. If, in 3 of the years the price indexed gained 12% or better, and 1 of the years the gain was 7%, the compounded 7 year total return would be about 50%. Of course, there are no certainties this would occur and this is just for illustration purposes only. Your results may be better or worse and in no circumstances would you incur stock market losses.
*Source for all data: https://www.slickcharts.com/sp500/returns/details
*Data analysis as of 12.31.2025
*^The S&P 500 is a trademark of the Standard and Poor's Co. and consists of the 500 largest US based companies. One can't invest directly into the index.
Securities and advisory services offered through Centaurus Financial, Inc.,
member FINRA and SIPC, a registered broker/dealer and registered investment advisor.
6627 Bay Laurel Pl, Avila Village, CA 93424
Phone: 805-473-6679 Fax: 805-258-5476
CA Insurance License #0703952
Branch Office: 1186 E. Grand Ave., Arroyo Grande, CA 93420
Paine Financial Services and Centaurus Financial Inc are not affiliated.
Neither Paine Financial Services or Centaurus Financial, Inc. offer tax or legal advice.
This message is intended for residents of the United States of America in certain states only.
Please check with us to ensure we are registered in your state.
No investments are offered without a prior prospectus
We use cookies to analyze website traffic and optimize your website experience. By accepting our use of cookies, your data will be aggregated with all other user data.