As an annuity agent, I am often asked which insurance company offers an indexed annuity with the best returns. And that is not an easy question to answer. There are dozens of companies offering several fixed indexed accounts each.
However, I did come across an annual statement recently that even amazed me – and I have been working with indexed annuities for well over a decade.
Full disclosure: This was not a client of mine, but the statement was authentic and dare I say mind blowing. This particular indexed annuity returned over 57% during a twelve month cycle for its owner. That was far and away the best one year return I have ever seen on paper.
The aforementioned annuity owner made a 57% interest return on his investment and his interest was locked-in and became part of the principal. (This assumes the annuity owner did not withdraw some of the gains.) That is simply an amazing return for a non-variable investment that has no direct ties to the market.
To be fair, a return this high is extremely unusual in an indexed account. Most indexed annuities have been returning around 20% over the last twelve months (March to March or April to April.) But this example certainly illustrates the power of indexed accounts.
What other fixed income, insured account can offer returns north of 20%, lock those returns in each year, and do it all without subjecting your principal and earned interest to stock market losses? None that I am aware of.
Elements of annuity investing that are often overlooked are the spreads, caps, and participation rates.
Several annuity providers monkey around with these numbers from year to year and when they are changed in favor of the insurance company, it can greatly reduce your future earnings potential.
Why do I bring this up? In the case of the person with the 57% rate of return, his spread, cap, and participation renewal numbers did not change one iota on his anniversary date. Thus, his annuity has exact same earnings potential over the next twelve months as it did before.
The annuity provider that credited the 57% is a well known and very well rated company in the marketplace. They offer several terms and accounts to choose from, but their five and ten year accounts are most popular. The unnamed annuity investor who locked-in this massive gain owns a ten year account.
Let’s take a step back for a moment and remember the value of indexed annuities. While double digit gains are fantastic during times like these, it is the unprecedented safety these accounts provide that can be most valuable for their owners.
There are several unknowns that can cause you to lose substantial amounts of money in the stock market. We have experienced all kinds of world and economic events over the last decade that have derailed stock markets here and abroad on more than one occasion.
When the market goes down, your indexed annuity principal and earned interest are safe however. You cannot lose money when the market inevitably corrects again and again. If you are more interested in protection from market losses and you still desire the potential for above average returns, an indexed insurance product can be a very wise choice.
I would imagine that you want to know who offers a fixed annuity that returned 57% in one year. And I will be happy to tell you.
Contact us and we will email you brochures and personal illustrations. Working together, we can decide if an indexed annuity is a suitable investment as part of your overall portfolio.