Fixed Index Annuities (FIAs) are a type of interest-bearing savings account within an insurance product. They might be pitched as a safe investment to entice sales, but they are not an investment.

Technically, FIAs are deferred annuities — deferred meaning you don’t have to take a stream of lifetime income from the product until you choose to do so in the future, or not. Annuities are insurance companies’ versions of savings or investment accounts that have guarantees (insurance) and some tax benefits.

The FIA interest rate floats based on the performance of an outside measurement. Most use the S&P 500 Index (a stock portfolio) as their outside measurement. You are not invested in the S&P 500 Index; it is used as the basis of the interest rate.

The typical FIA has a guaranteed minimum rate of interest like 1 or 2 percent — the floor you are guaranteed to earn. The upper limit of interest paid is a portion of the outside measurement. So as the sales pitch goes, you capture some of the stock market’s highs while being protected from the stock market’s lows.

Best to think of these accounts as principal protection and not wealth creation. If this isn’t your objective, these are probably not for you.

You get a portion of the outside measurement’s return on the upside. The FIA has “cap rate” and a “participation rate” (terms might vary).

Cap rate is the most interest you can earn. For example: Say the S&P 500 Index gains 15 percent in a year. Your cap rate might be 6 percent. In this case, you gave up 9 percent of the S&P 500 upside to insure your safety.

The cap rate can be decreased by the participation rate. Let’s say you have a participation rate of 80 percent and the S&P 500 Index goes up 6 percent in a year. Your cap rate is 6 percent, so you get the 6 percent right? In this case, your participation rate kicks in and limits you to 4.8 percent; 80 percent of the S&P 500 return.

So, in this example, you have an interest-bearing account that pays between 1 and 6 percent.

Tax-wise, annuities are tax-deferred until withdrawal — your gains are not taxed as long as they sit in the annuity. You pay regular income tax rates upon withdrawal for all amounts that are not a return of principal. You will not get more favorable capital gains tax rates upon withdrawal.

When considering an FIA, ask about fees, surrender charges, whether you are limited to one lump-sum deposit or contributions over time, your need for a lifetime income option, your time horizon, your other interest rate account options, income needs, emergency withdrawal options, and your ability to close the account.