In many cases, once a person decides he or she likes the idea of using an index annuity they always want to find the best annuity for maximum performance. As much as I tell people the strategy is more important than the product, there are plenty of people who dig a deep hole by comparing options and talking to several agents.
Aside from a handful of products, most annuity contracts are similar. Surrender terms, free withdrawals and rider options for a fee can be easily compared but the growth potential is different in almost every contract. And it’s the growth potential that may give you the difference that sets one apart from another.
I have the list of products I like. It’s based on my experience of working with several companies and performance and rate adjustments first-hand over several years. But I’m not limited to using those contracts and every now and then a new client wants to try something different, either to verify my recommendations or potentially find a better option. It’s what many smart consumers do so I will always do my best to accommodate.
This happened recently with a person I’ve been talking to throughout the year. She is working on a retirement plan and has decided to use an index annuity but is waiting for the right time. She asked about several companies in addition to the recommendation I made and it seemed like a good time to explain how this can work for everyone else.
Below I’m going to give you performance figures for indices that can be found inside several of the top selling contracts. Since 2019 has been a great year in the market then it’s a good chance to look at how these popular index options compare against each other and the stock market in general. Since most general explanations of index annuities use the S&P 500 I will disregard that for this example so everyone can see that a variety of additional options and opportunities exist.
Let me first offer two disclaimers:
- Each of these index returns will be limited by a cap, participation rate or spread and in some cases a combination of two out of three. Since those are changing constantly I’m not going to go into details of the actual contract yield. Let’s just see how each index performs.
- Most index annuities offer annual resets, meaning that’s how often you lock in gains. Some of the below options exist on a two or three year reset so there’s an extended period of time to either achieve more growth or have it wiped out by a downturn in the market.
Below you will see first the company, then the contract surrender term options and then the available index with annual performance from the past 12 months.
Midland National – 8 and 10 year surrender options
S&P MARC 5% Excess Return Index 13.49% annual yield
Great American – 5 and 7 year surrender options
S&P 500 Low Volatility Daily Risk Control 10% Index 8.13% annual yield
Nationwide – 5, 7, 9 and 12 year surrender options
JP Morgan Mozaic II Index 6.58% annual yield
Allianz – 7 and 10 year surrender options
Bloomberg US Dynamic Balanced Index 10.31% annual yield
PIMCO Tactical Balanced Index 8.06% annual yield
Blackrock iBLD Claria Index 9.86% annual yield
Lincoln National – 5, 7 and 10 year surrender options
Fidelity AIM Dividend Index 8.63% annual yield
Athene Annuity – 7 and 10 year surrender options
BNP Paribas Multi-Asset Diversified Index 10.47% annual yield
Morningstar Dividend Yield Focus Target Index 4.7% annual yield
Janus SG Market Consensus Index II -10.02% annual yield
Fidelity and Guaranty – 7 and 10 year surrender options
Barclays Trailblazer Sector 5 Index 12.94% annual yield
The above indices represent some of the more popular options that are most aggressively pushed by other agents and marketing organizations. The annuities themselves may not have much difference but the performance potential will be tied to the index options you have. Going back to my disclaimers, each of these will be limited by cap, participation, spread or even a reset that goes longer than one year.
If you want to shop based on index alone then this is a good start. There is a subscription database available for an annual membership of around $800 if you want to invest some money in it but even I have yet to find that worth the subscription price.
Why? Because true product selection goes a little deeper. I put a lot of weight on interactions I have with certain companies. A client-friendly user interface with excellent customer service and solid renewal rates is what makes your experience with annuity enjoyable and profitable. If one contract does well then it’s likely that another will also. So why not stick with the strategy that works and a company that treats you like you just gave them a big chunk of hard-earned money.
My reputation is on the line as well so I’ll never recommend anything but what I know works.