I found this InvestmentNews article by Darla Mercado to be interesting by pointing out how some things come full circle. The article mentions how indexed annuities became popular after the bond market massacre of 1994 and that indexed annuities were created for an environment like the one we're in today. Thus fixed indexed annuities have become popular once again in today’s low interest setting.
In general, annuities are retirement planning vehicles that can allow you to transfer significant risks, like market uncertainty and life longevity, over to the insurance companies that can shoulder these type risks, given their access to large pools of individuals and their access to institutional pricing. The main concept of most annuities is their ability to minimize the potential loss to their owners, often completely shielding their owners from any potential loss depending on the how the fixed indexed annuity is set up, as well as giving them the option to have income for life if they choose.
"Indexed annuities" are a type of fixed annuity that credits owners' accounts with a minimum guaranteed rate of interest and combines that with an interest rate tied to movement of an index. However, fixed index annuity owners don't fully capture all of the index's performance in most indexed annuities due to the fact that owners also get the benefit of being shielded against downside loss. So if the market index goes down, many Index annuities have a zero percent floor. Meaning owners can’t lose when the market goes down. Owners will either get zero percent when the market goes down or their will receive interest crediting for a portion of the market index when it goes up. A safe, but conservation way to grow your retirement savings without the worry of losses, that is if you leave your money in until the end of the prearranged agreement period.
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Note: Annuities can be confusing to many people. As an "independent licensed agent" I try to explain things to you in simple terms so you feel comfortable making a decision. Then I can help you choose an annuity that you feel best fits your needs from a large choice of different insurance companies. Plus if you choose to work with me you will have personalized service by a local independent agent that can shop rates for you, rather than working with a captive agent working for just one insurance company. If you would like my assistance to discuss and/or start the process of getting an annuity please call me at 941-404-5334.