Fixed Annuity vs Index Annuity: Which Do You Need?
September 16, 2020 by E. Napoletano
Securing steady, reliable income payments in retirement can be a big challenge. Fixed annuities and index annuities are two types of annuity contracts that can help provide reliable retirement income.
While their names are suspiciously similar, these two annuity products work very differently. A fixed annuity offers a guaranteed rate of return on your initial investment. An index annuity, meanwhile, may offer greater returns—in exchange for greater risk.
1. “All annuities have annual management fees”? Not true. Only structured and variable annuities do.
2. “Many fixed annuities come with death benefits”? All annuities do with exception to some variable annuities.
3. There “are a few important different rates to consider when evaluating index annuities: the rate of return of the index your annuity tracks, the participation rate, and the rate cap.”? How about the indexing method? The index? The spread rate?
4. This is a big NOPE on the “your losses are generally limited with an indexed annuity.” They are always limited to no less than zero.
5. Your “guaranteed rate can fluctuate every year”? Not even close. Wrong.
While these weren’t terribly distressing mistakes, they are endemic of a greater problem: inaccurate information being disseminated about annuities. Compounding the issue is the fact that the journalist would be considered an authority, or insider.