By Jim Poolman
Myth: Indexed annuities underperform as compared to other investment vehicles, such as stocks or bonds
Truth: First, indexed annuities are not designed or intended to perform comparably to stocks, bonds, or the S&P 500 because they provide a minimum guarantee, whereas investments do not. Furthermore, indexed annuities are insurance products and comparing their potential returns to those of stocks is apples to oranges. Negative market experience can come at the most inopportune time – when consumers do not have the ability or capacity to wait for the market recovery just to get back to even. Indexed annuity buyers purchase insurance as protection from fluctuations in market value and a guaranteed income for life. A CD comparison is inaccurate as well because CDs can’t offer guaranteed income.
There are many unique benefits to indexed annuities that make them an important part of any balanced financial plan. More specifically, indexed annuities offer tax-deferred, market linked growth with protection from market downturns. In fact, no indexed annuity purchaser has lost a single dollar as a result of the market’s declines.
Check back tomorrow to learn the real deal with surrender fees.