(Important note: since publishing this blog post in April 2014, cap rates have been lowered and spreads have gone up. In addition, the bonus rider has been reduced from 50% bonus to 25%. Both negatively affect potential returns of this product. This shouldn't be a surprise. As interest rates fall, you can expect returns to be smaller and smaller on index annuities.)
The annuity business has grown in popularity as investors, especially those nearing retirement, look for options to protect themselves from stock market volatility and give them a decent income stream in retirement. With over $200 billion in annual sales, the annuity industry is big business with lots of salesmen trying to persuade you to make a purchase.
Today I will dig deep into the best selling indexed annuity for the 4th quarter of 2013. Sales of indexed annuities, a fixed annuity that provides a minimum guaranteed rate of interest combined with an interest rate tied to movement of an index, increased to $39.3 billion in 2013, a 17% gain year over year. This is the biggest percentage increase of any form of annuity.
