This is our third installment of our educational video series on why the pundits hate annuities.
(Related: Why Do Pundits Hate Indexed Annuities?)
Of course, if you sell annuities, or have even thought of selling annuities, you know that the value of a variable annuity can go up or down with their underlying investment funds.
Indexed annuities introduce some guarantees, but still participate indirectly in investment market returns. Over the long run, especially during the periods of low interest rates, variable annuities and indexed annuities will generally outperform fixed annuities. And certainly the same can be said for mutual funds and other investments, even considering some of the tax benefits of annuities.
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That may be why the pundits hate fixed annuities, but that is really comparing apples to oranges (or apples to broccoli if you saw our first video). As we show newcomers to annuities in our video, fixed annuities are for people that do not want to participate in the investment market: those who are the most risk averse in the risk/reward continuum. The more logical competitor to fixed annuities is bank certificates of deposit.