The Evolution of the Indexed Annuity

By Misty McMinn

Indexed annuities were created to offer safety and guarantees with a growth potential greater than that of a fixed rate annuity. The originally indexed annuity was simple, basic and easy to understand without a lot of moving parts. The investment options originally were an annual point-to-point with a cap and a monthly cap with investor’s returns tied to the performance of the S&P 500. Before riders with fees were added as an option, the client was guaranteed not to lose any of their principal and since interest rates were higher at that time, many products had minimum growth guarantees of more than 1%.

Index Annuities Today
• No fee rider options
• Bailout provisions
• Competitive investment options
• Built-in inflation protection
• Long-term care riders available
• Attractive to conservative clients
• Stable investment
• Lifetime income

With index annuities, it is easy to get too focused on the capped potential and think that is negative. Since there is so much money in CD’s and other lower bear-ing accounts, now’s the time to introduce your clients to the guarantees that index annuities offer. If you’re not talking to your client about them, it’s more than likely someone else is. Clients are planning for longer retirements. Therefore, retirement funds need to last longer. Indexed annuities provide for minimum growth guarantees, principal protection, NH riders, and guaranteed lifetime income. Consider reallocating a portion of your client’s retirement funds to indexed annuities for peace of mind.