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Life Health > Annuities > Fixed Annuities

Fixed index annuities reach 20-year milestone

By Ed McCarthy, CFP, RICP

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As of February 15, fixed index annuities (FIA) have been on the market for 20 years, according to a press release from the Index Annuity Leadership Council (IALC).

The release notes, “Fixed indexed annuities offer the opportunity for growth through a steady, guaranteed lifetime income stream, all while protecting the principal from the uncertainty of market volatility. Indexed annuities offer a guaranteed rate of return, along with the potential for additional interest credited based on an external index. Once interest is credited, it will compound annually and can never be lost.”

The product has proven popular with buyers over the years. A LIMRA February 23, 2015 press release reported that “Indexed annuity sales reached $48.2 billion in 2014 – $9.0 billion higher than prior year – a 23 percent increase from 2013.

For the first time, indexed annuities held more than 50 percent market share of all fixed annuity sales in 2014.  Indexed annuity sales were $12.2 billion in the fourth quarter, an improvement of 3 percent compared with fourth quarter 2013 results.”

Jim Poolman, IALC’s executive director, is optimistic about FIA’s outlook. “FIAs are going to continue to evolve to suit the needs of consumers,” he responded by email.

“Twenty years ago the products were much more basic, made for a different time. Over the past couple of decades they have developed to meet new needs and to provide guaranteed income throughout retirement. I have no doubt that FIAs will continue to evolve over the coming years as traditional retirement products change and the need for guaranteed income continues to increase.”

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