Fixed Index Annuity Rates: Why Renewal Rates Matter

Hello out there in America, Stan The Annuity Man, America's annuity agent licensed in all 50 states, including your state. What are we talking about today? The most popular product on the planet. The best thing since sliced bread. The greatest thing ever. It's too good to be true. It's fantastic. I went to a chicken dinner seminar, and they told me about it. It's called a Fixed Index Annuity. Now, the good part is you have Stan The Annuity Man to tell you about it, not some guy pitching it as too good to be true. We're going to talk about Fixed Annuities and renewal rates on Fixed Annuities, something most agents may not even know, but you need to know before considering a Fixed Index Annuity. We'll go through all the details.

A Personal Story

Now, people always say, "Hey, tell this," because I share stories offline, and they say, "You need to tell that story." Here's the story they wanted me to tell. I went to the Air Force Academy a long time ago. It's a great institution of higher learning, but I'm not militaristic. I do nothing in moderation. The bottom line is when I was at the Air Force Academy Prep School, where they sent athletes to get in line for the academy, I was ranked second in the whole school in demerits, and that's not easy to do. You have to make your bed and shine your shoes, among other things.

Ultimately, I had so many demerits that I just put demerit slips on the bed and my shoes because I didn't care. So, the question comes, "Who was number one in demerits? You finished number two," and that's not good because I like finishing number one. I'm the top agent in the country; that's number one. Who finished number one? My roommate.

The "Got Guarantees?" Campaign

'Got guarantees?' Remember the "Got Milk?" commercial, or are you too young for that? Got milk? If I were the annuity czar for the day, year, or month, I should be the annuity czar. Whoever the president is should appoint me annuity czar over all things annuity, making all decisions on marketing, etc. This would be the marketing slogan. Now, there wouldn't be a milk mustache because that makes no sense, but 'Got guarantees?' should be the annuity mantra because annuities are contractual guarantees. They're contractual guarantee transfer of risk products issued by life insurance companies. I actually tried to find the exact font they used in "Got Milk?" because I was so obsessed with getting this right.

Understanding Fixed Index Annuities

Let's talk about Fixed Index Annuities and what they are and are not because they're often pitched as something they're not. They are not market products, securities, or stock market growth products. They are not too good to be true or one-size-fits-all. They are not market upside with no downside, but that's how they're often pitched.

Fixed Index Annuities, formerly called Equity Indexed Annuities, were introduced in 1995 to compete with CD returns. Since 1995, even in a bull market, they've delivered CD-type returns because that's how they're designed. Returns are calculated primarily based on a call option on an index like the S&P 500. A call option is essentially a bet on future price movements. The return is locked in, and if the market declines, you won't lose any money.

Renewal Rates

Let's discuss renewal rates in Fixed Index Annuities. Most annuity returns are based on a call option, and limitations like caps and spreads are applied. Some companies offer high limitations in the first year, which can change in subsequent years. If you buy a 10-year surrender charge Fixed Index Annuity, you might get a good return in the first year, but the remaining years depend on the annuity carrier's renewal rates, which are beyond your control.

The Importance of Checking Renewal Rate History

You should check the renewal rate history before signing up. Some companies provide high initial rates but lower them later. This is rare but possible, and you don't want to be caught off guard. We can help you check this at The Annuity Man .

Be Cautious with Indexed Annuities

In the Indexed Annuity world, some companies create new indices and project past returns that never actually existed. Some states are moving to ban this practice, insisting on indices with a proven history. Never buy an Indexed Annuity based on hypothetical returns. Expect CD-type returns and check the issuing carrier's renewal rate history before signing.

At The Annuity Man, we provide detailed information on Indexed Annuities. I've written a book on this topic, which you can download for free. I'm the top agent in the country, licensed in all 50 states, and I'd love to work with you to create a customized plan. Contact us for more information.