Real-World Index Annuity Returns

Journal of Financial Planning

Published 2011

This Journal of Financial Planning article offers the first empirical exploration of fixed indexed annuity (FIA) returns based upon actual contracts and actual credited interest. Its findings include: annuity returns have been competitive with stock and bond portfolios; their design has limited the downside returns associated with declining markets, and have achieved respectable returns in more robust equity markets; studies that have criticized FIAs are typically based on hypothesized crediting rate formulae, constant participation rates and caps, and unrealistic simulations of stock market and interest rate behavior; and the returns of real-world index annuities analyzed in this paper outperformed the S&P 500 Index over 67% of the time, and outperformed a 50/50 mix of one-year Treasury bills and the S&P 500 79% of the time.

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