A top index annuity can provide you with a superior rate of return while still maintaining the safety of an annuity with a fixed rate of return. The best annuity plans generate the most monthly income and highest rate of return on your investment.
An index annuity can generate more income because there are two avenues for earning income. First, there is an annual rate of interest that is guaranteed in writing under the terms of the annuity contract. Second, you can receive additional income in any given year when the stock market index (usually a broad equity index like the S&P 500) goes up in value. While it is true that you won’t make as much money in a rising stock market as you would if you invested directly in an S&P 500 index fund, the beauty of this type of annuity is that you will not lose a cent if the market and index goes down.
For many risk averse investors, it is worth sacrificing some of the market gains in an up market in return for a guaranteed minimum return, no downside market risk, and a chance to earn a higher return when the index does well. When comparing annuity plans, you will find that the best index annuity will have the following features.
- Higher guaranteed annual returns
- A higher participation rate in the gains of the index
- A higher maximum cap on the amount you can earn in any given year
It is unlikely that you will find an index annuity that is tops in every category. What you are really looking for is the highest index annuity total rate of return. Is it better to have a higher guaranteed rate and a lower participation rate? Is it better to have a lower guaranteed interest rate and a higher participation rate? Figuring out what is the best index annuity is confusing. Let us help clear up the confusion by doing the analysis for you. Once you understand how the different factors can affect your rate of return, you can make an educated decision on the best index annuity for you.