Annual reset is one of the most powerful features of fixed indexed annuities, providing a mechanism that permanently locks in gains while protecting against future losses. Each year, your account's starting point is "reset" to reflect previously credited gains.
How annual reset works:
1. Year 1: Index gains 8%, you earn 6% (after cap), account grows
2. Year 2 starts: Your new starting point includes Year 1 gains
3. Year 2: Index loses 15%, you earn 0% (floor protection)
4. Year 3 starts: Your account value is same as end of Year 1
5. Year 3: Index gains 5%, you earn 4%, starting from Year 1's level
The power of annual reset:
- Previous gains are never at risk from future market declines
- Each year is an independent opportunity to earn
- Recovery from market crashes starts from your highest value
- Compounds returns more safely over long periods
Compare to variable annuities:
- Variable: $100K grows to $120K, crashes to $84K, recovers to $100K = $0 gain
- FIA with reset: $100K grows to $106K, earns 0% in crash year, stays at $106K
Why annual reset matters:
- Protects retirement savings during market volatility
- Removes the need to "time" the market
- Provides psychological comfort during market downturns
- Allows aggressive allocation without downside risk
For Ocala retirees who remember the 2008-2009 financial crisis or the 2020 market crash, annual reset provides crucial protection against seeing years of gains wiped out.
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