Terry Savage: Index-linked annuities aren’t the bargain they seem
July 1, 2025 by Terry Savage
The promises are enticing: stock market upside with no risk on the downside. Or market “participation” with downside “protection.” File this under too good to be true. As with all sales pitches, the devil is in the details.
Wink’s Moore on the Market: Terry Savage is not even close to right, in this little gem.
– Indexed annuity sales in 2024 were not $65.6 billion. They were $130.0 billion.
– This is a nearly 34% increase from the previous year; not a 38% increase.
– This is not the 10th consecutive year of record sales for these insurance products; it is the fourth.
And she really doesn’t get it.
– “You never get the full upside of the stock market.”
This is because you conversely never get the full downside of the stock market, when purchasing indexed annuities.
– “Most of these products are linked to an index that does not include dividends — which are historically about 40% of stock market returns!”
If you are not invested in the stock market, you cannot benefit from it’s dividends. Insurance companies buy options, which provide the index-linked interest on these annuities; the client’s money is never subjected to the losses associated with being directly invested in the market.
– “If you add an income rider at the time of purchase, you can only withdraw via the insurance company’s calculated monthly payment schedule.”
Wrong. You can withdraw as much as you’d like with an income rider. You may be penalized for doing so, but it is an available option.
Why doesn’t she understand that annuities are not about greater alpha? Annuities are a risk-mitigation tool; they are not intended to compete with investments, in terms of potential gains.
This article is NOT “the Savage Truth.”
Terry- the next time you decide to write about annuities, why don’t you get it from someone that is third-party and unbiased; a TRUE expert in the field. This will ensure that you don’t continue to disseminate inaccurate information to the masses. -sjm
