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Defending the Indexed Annuity


In the article “A Lost Decade: Or Was It?,” Mark Triplett of Insurance News Net says that he researched the indexed annuity for a life and annuity workshop to see if the product was still a good value in this interest rate market.  The author found that indexed annuity products are still very relevant and consistently meet and even exceed investors’ expectations.  The advertised benefits of indexed annuities include the fact that they allow for market gains without the worry of losing any of your principal investment or previous interest rate gains.  This still holds true and the author found that the average interest rate opportunity for an indexed annuity is higher than fixed annuity rates.

One of the main differences with an indexed annuity is that investors are earning interest on their annuity rather than a return or gain on their investment.  Because of this, they are not losing money in a down market.  Many people refer to the 2000’s as the “Lost Decade” because most investors did not gain any money and a lot of investors actually lost money from the year 2000 to today.  If you had an indexed annuity, however, which is based on any given stock market index, you would still have received a gain over the past decade even with overall downturns.  That is because you would have received interest in any up market and not lost money on your principal or gains in the down markets.  Your account would have stayed flat in those particular periods.

Interest rates have been low now for eight years.  Although it is likely that they will go up eventually, experts have been saying that for years.  Indexed annuity products have proven invaluable for many investors over the past decade.  It is always smart to have a what-if strategy in case interest rates really skyrocket and it would be in your best interest to compare equity linked CDs or fixed annuity products in the future.  Right now though, the author found that it wasn’t difficult to defend indexed annuity products because they have proven to be a beneficial investment for many people over the last decade.

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