The increasing popularity of fixed indexed annuities

By Jason Kestler

Kestler Financial Group, Inc.


If you want to move your money to a place where there is safety from market losses, plus the prospect of decent growth potential, and the assurance of a guaranteed income stream, a fixed indexed annuity is where you will find that combination of features and benefits.

The insurance industry first introduced fixed indexed annuities in the mid-1990s, and sales of these products have increased steadily ever since as consumers have become more aware of the benefits of these products.

Year
Sale of fixed indexed annuities
(in billions of dollars)
1997
3
1998
4.2
1999
5.15
2000
5.25
2001
6.5
2002
11.7
2003
14.01
2004
23
2005
27.26
2006
25.3
2007
25.2
2008
26.7
2009
30.2


Source: “Real World Index Annuity Returns,” published by the Wharton Financial Institutions Center.

Why have fixed indexed annuities become so popular? It has everything to do with how you, as a consumer, are feeling and the choices you have to make with your money.

A fixed indexed annuity is merely an insurance product where you can store your money and have it grow at a guaranteed, fixed interest rate or at a potentially higher rate based upon a portion of the performance of an outside index, such as the S&P 500 Index. So, annuities can be an additional option, a complement to the places where you store your money, just like products offered by banks, securities brokerages, and mutual fund companies.

However, annuities offer features and benefits that many other financial vehicles do not offer. In the past, if you have chosen products that don’t contractually guarantee the safety of your principal, chances are you may have taken a pretty big hit to your value in recent years. That has caused a lot of people to look for a safer place to put their money today as well as plan for and position themselves to be better prepared for the next market correction.

Unfortunately, if you look to traditional guaranteed interest rate products, you may find unattractively low interest rates.

So what you want is a place where you know your money is safe, and by safe, that means you want it protected by contractual guarantees from market losses, not just a hope and a prayer. But you also want a place where you can receive a decent rate of interest over time. In addition, if retirement income planning is one of your primary goals, you want to know in advance what your minimum predictable stream of income will be.

That’s exactly what you will find when you look at fixed indexed annuities. And that’s why sales of these annuities have been increasing year after year.

If you want to move your money to a place where there is safety from market losses, plus the prospect of decent growth potential, and the assurance of a guaranteed income stream, a fixed indexed annuity is where you will find that combination of features and benefits. In a fixed indexed annuity, you will not lose any principal when the next market correction occurs.