Speak with a Registered Agent: 1-866-223-2121

Speak with a Registered Agent: 1-866-223-2121

Why Indexed Annuities are Worth a Fresh Look


By

Near-retirees have purchased indexed annuities (also called fixed indexed annuities or equity-indexed annuities) in relatively modest but nonetheless record numbers in the past year or so. The reason: the guaranteed lifetime withdrawal benefits (GLWB) of these products are now in some cases more generous than the GLWBs offered on variable annuities.

Why? Indexed annuities, which invest mainly in bonds, are less risky than variable annuities, which invest largely in stocks. Less risk means lower hedging costs for the insurer, which (generally speaking) enables the insurer to offer a higher lifetime payout rate. Testing one particular indexed annuity GLWB with the help of an online calculator, I seemed to be able to get an extra guaranteed $2,000 a year at age 70 (after a 10-year waiting period) than I could from a typical variable annuity GLWB. (Individual products and results will undoubtedly vary).

When I wrote Annuities for Dummies, indexed annuities did not yet have GLWBs. I did not recommend indexed annuities at the time, for several reasons. First, they were not easy to understand. Second, the past returns of apparently similar products varied so much that it seemed difficult to make an informed purchase. Third, some insurers paid huge commissions to agents, which implied a smaller share of the pie for the consumer. In a few headline-grabbing instances, the high commissions also appeared to incentivize high-pressure sales. Today, for near-retirees in need of guaranteed income (but who shy away from pure income annuities), indexed annuities might be worth a fresh look.

Written by Kerry Pechter

For more information about the product mentioned in this article contact us here:

Newest Blog Posts

Information Request Form

If you have questions or would like more information, please complete this form and a licensed professional will be happy to help.

By providing your information and clicking 'Submit' above, you acknowledge that you have read and agree to this site's privacy policy. You also provide your consent to be contacted at the email address or phone number provided above (including any wireless number) by licensed agents or representatives from or on behalf of AFYI Holdings Group, LLC and other companies to provide the information requested and/or offer annuities or financial products. You understand that these calls or SMS messages may be generated using an automated telephone dialing system, a pre-recorded message, or artificial voice. Consent to receive such messages is not a condition to purchase any goods or services. You may opt out at any time by following the instructions in the messages you receive.  Receiving quotes and information through our website is free, and you are under no obligation to purchase any goods or services as a result of this request. You affirm that you are the subscriber of the provided telephone number or that the subscriber authorized you to provide the number. Message and data rates may apply. AFYI Holdings Group, LLC is committed to respecting your privacy and adhering to all applicable laws and regulations, including the Telephone Consumer Protection Act (TCPA).