# How to Calculate Fees in Fixed Index Annuity

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A fixed index annuity, also known as an equity indexed annuity, is an investment vehicle designed to help individuals save for retirement. It differs from other annuities in that the interest the insurance company pays to the holder is not fixed, but rather linked to an equity index such as the Standard & Poor's 500 Composite Stock Index. The fees the holder pays are normally a percentage of the interest received.

## Calculate the Participation Rate

The amount of interest you receive, and in turn the fees you pay, is calculated using the participation rate. The participation rate is the percentage of the index rate increase you receive as interest. For example, if your fixed index annuity has a participation rate of 90 percent and is linked to the S&P 500 Composite Stock Index, which has risen 10 percent, you will receive 9 percent interest for the period.

## Calculate your Credited Return Percentage

The amount you actually receive is called your credited return. Imagine you have paid a total of \$10,000 in annuity payments and your credited return is \$600. Divide your credited return, \$600, by your total payments, \$10,000, giving 0.06. Multiply the answer by 100, giving six. Your credited return percentage is 6 percent.