The stock market is setting records nearly every day as it approaches 25,000. Now may be the time to consider fixed indexed annuities as an investment because the current bull market, with its high and seemingly illogical asset valuations, is likely unsustainable.

Let’s explore why fixed indexed annuities may be a smart investment.

“Fixed indexed annuities are meant to compete, in the same wheelhouse, with bonds and CDs,” said Mark J. Orr, a certified financial planner and author of “Retirement Income Planning: The Baby-Boomer’s 2017 Guide to Maximize Your Income and Make it Last.”

Simply put, an indexed annuity is a contract issued and guaranteed by an insurance company. Increases in an equity index, such as the S&P 500, determine the amount of interest credited.

Orr believes fixed indexed annuities are not created equal: Some are better suited for “safe” accumulation, while others are good at providing a strong (and potentially growing) guaranteed lifetime income.

“Fixed indexed annuities have their pluses and minuses. Unlike a non-qualified bond fund or CD, you can defer income taxes and also defer unwanted 1099’s,” Orr said.

Unlike variable annuities, with fees ranging from 2 to 3 percent, fixed indexed annuities have no management fees. Safety is another benefit, because your premium and credited growth are guaranteed by an insurance company. And there is no downside risk in a declining market, but during negative stock years, you might not receive any credited growth.

No investment, fixed indexed annuities included, is right for all people and all situations. “However, I feel that most people should have a percentage of funds in fixed indexed annuities or CDs that are principal protected, and they can draw on them, rather than stocks and bonds, when markets are falling hard,” Orr said. “The plan makes the difference – not the inevitable corrections.”

Growth on fixed index annuities is subject to rate floors and caps. Calculating investment return with a fixed indexed annuity is complex. Start by tracking the related index to learn how much of the index return is credited to your investment.

Also consider:

Cap: Insurance companies place a ceiling on the maximum you’ll earn. Caps might run from 3 to 9 percent, and they’re based on the length of an annuity. For example, with an 8 percent cap, using the S&P 500, and if the S&P 500 Index advances to 14 percent, you’ll be credited 8 percent.

Participation: This is the percentage of an index that an annuity is credited should a participation rate, without a cap, be 52 percent. If the S&P 500 Index increase to 14 percent on a contract anniversary, your investment would increase by 7.28 percent. Some indexed annuities have participation rates and a cap, though.

Spread: A spread is deducted from a gain from an index that an annuity is linked. With an index that gained 10 percent that’s coupled with a 4 percent spread, you’d be credited with a 6 percent gain.

Remember, fixed indexed annuities are not guaranteed by banks or insured by the FDIC. An insurance company’s guarantee is backed by the financial strength and claims paying of the issuing company.

Annuities accumulate tax differed, but can incur taxation when distributions are taken. You may incur surrender costs with excessive premature distributions.

Annuity term and conditions might be changed by annuity providers.

Florida Insurance Guaranty Association also offers $250,000 per owner should an insurance company that issues an applicable fixed indexed annuity fail.