How’s that for a way to start, admitting I was wrong. In a number of previous columns, we asserted the opinion that Index annuities were gimmicky products, intended to generate high commissions for brokers who were not looking out for their clients’ best interests. First, let me say that these statements are still right, but with some exceptions. Perhaps in response to movements to have Index annuities treated as securities, and overseen by the investment regulatory bodies, there have been significant product changes introduced.
 
This new generation of products provides participation in the investment markets with no possibility of loss. The annuity owner gets up to 65% of the upside of the S&P 500 Index. So this year, that could be as high as a 13% return. In a down year, (remember 2008?), the contract does not show a decline, it is just flat for that year. In a recent study, conducted by a world renowned academic institution, Index annuities were “backtested” against the S&P 500 for the past ten years. Lo and behold, the index itself delivered an average return of -3%. The index annuity return for the same period, delivered a +6% average annual return. Pretty darn good.
 
In addition to the performance and contract improvements, generous income guarantee benefits have also been introduced. This is extremely important to those who will ultimately use these annuities to provide retirement income. In earlier versions, you were locked into the product for up to twenty years.
 
For whatever reasons, we now have an annuity product that can keep pace with inflation, provide income, and address some of the shortcomings of Fixed and Variable annuities. Tax deferral, upside performance only, generous income, pretty good features.
 
Remember, these attributes are true of good quality Index contracts, issued by strong, reputable companies. We are happy to provide a list of those that we have found to provide strong performance and guarantees from quality insurers. Just contact us at anadolna@associatesgroupinc.com