Comparison｜Index annuity and fund annuity, which annuity insurance is better?

American annuity insurance accounts are mainly issued and managed by life insurance companies.American Life Insurance Guide©️ Q2021 of 3Data reportLi pointed out that the following two types of annuity wealth management insurance accounts are the absolute mainstream of the American annuity wealth management market.

• Fund-based annuity insurance accounts (Varible Annuities, also known asSecurity annuity/ 36.0%)
• Indexed Annuities Insurance Account (Indexed Annuities / 29.0%)

2021Q3 U.S. Annuity Insurance Account Type Market Share Distribution

For policyholders, or investors,Which type of annuity insurance account is better?

In this article,American Life Insurance Guide©️and community agency membersHumming Life(North American Hummingbird Life) To work together, take a 10-year annuity insurance account as an example, and compare the specific legends and historical data to explain the two to the publicThe advantages and disadvantages of annuity insurance accounts can help investors understand the risk and return expectations of different annuity insurance types and make optimal retirement asset allocation decisions.

A traditional indexed annuity insurance account

Ms. Lee (pseudonym), 50 years old, currently lives in New York.Considering that retirement is approaching, traditional retirement accounts cannot save more money, so Ms. Lee considers opening a retirement annuity account.

Ms. Lee plans to deposit 2 US dollars every year, from 50 to 59 years old for a total of 10 years.Ms. Lee is more conservative, she has only dealt with banks every day, Therefore, Ms. Lee chose to openIndex annuityAccount to save.

The calculation table in the figure below shows the situation of Ms. Lee's annual deposit of 50 US dollars from the age of 60 to 2 in the second column on the left.

©️TheLifeTank.com This is not an offer or illustration for an insurance product. For Educational purposes only.

From the picture above, we can see that the orange horizontal line is 10 years later, when Ms. Lee is 60 years old.Annuity insuranceThe funds in the account,It is about $27.5.

In 25 years, in Ms. Lee's annuity account, the highest annual return was 8.35%, and the lowest annual return was 0.15%.

This is exactlyIndex Annuity InsuranceThe biggest advantage ofThe insurance company gives a minimum return rate of 0% to the index annuity account, and will not lose the principal..Therefore, whether Ms. Lee suffered the Internet bubble burst in 2000 or the financial crisis in 2008, we can see from the oval box above that the money in her annuity account,The growth has always been maintained, and there has been no decrease.

This traditional indexed annuity insuranceThe advantages are also its disadvantages,While the insurance company gives a minimum guaranteed rate of return of 0%, it will also give a maximumCapped rate of return(Cap), the capped rate of return given by different insurance companies is also different.In a period of economic prosperity and a steady rise in the market, exponential annuity insurance accounts cannot share more of the market’s fruits.

A typical explanation is that in the golden decade of economic prosperity from 2011 to 2021, the highest annual return of this index annuity account did not exceed 10%.

In order to overcome this upper limit, there are currently uncapped earnings on the market.Alternative indexed annuity products.Based on the interest rates in September 2023, the highest annual interest accrual for this type of enhanced product in the past 9 years has reached 10+%.

The following comparison will further show the advantages and disadvantages of the two different annuity accounts.

Fund annuity insurance account

Also at the age of 50, Ms. Lee reviewed her investment experience, fully assessed her own risk tolerance level, and opened aFund annuityAccount (aka:Securities Investment Annuity).

Ms. Lee deposits USD 2 into the fund-type annuity account every year for 10 consecutive years, as shown on the left side of the figure below.

©️TheLifeTank.com This is not an offer or illustration for an insurance product. For Educational purposes only.

From the picture above, we can see that the red horizontal line indicates that 10 years later, when Ms. Lee is 60 years old, the funds in the annuity insurance account,Accumulated to about $60.5, which is 2.5 times that of an index annuity account in the same period.

In 25 years, the highest annual income in Ms. Lee's annuity account was 36.68%.

This pointed outFund annuity insuranceThe biggest advantage of ——In the economic boom period when the market is stable and continuously rising, the fund-type annuity account directly participates in and shares the market’s rising results, and the compound interest effect is amazing.

Everything has two sides.Due to direct participation in the market,Securities Investment Annuity InsuranceThe biggest advantage, but also its disadvantage——When the stock market falls, the policyholder will bear the risk, the account funds will correspondingly form a loss, and the account amount will face relatively greater fluctuations.

A typical illustration (the green horizontal line in the above figure), during the 2008 financial crisis, the fund accountDown 41.95%, The account balance decreased from $93.6 in the previous year to $54.3.

Comparison of index annuities and fund annuities

Based on the same historical market data, we summarize the comparison of the account amounts of the next two annuity insurances,

©️TheLifeTank.com This is not an offer or illustration for an insurance product. For Educational purposes only.

Our summary

Index Annuity Insurance和Securities Investment AnnuityInsurance, there is no such thing as "better" or "worse" in the two.

The exponential annuity sacrifices the upside potential in exchange for underpinning protection of funds.On the other hand, fund-type annuities have given up fund protection, in exchange for the highest growth potential.

Every insured person needs to choose his own annuity account based on his age, risk tolerance, and financial goals.

In actual operation, index annuity insurance accounts and securities investment annuity insurance accounts are not monolithic.

If you need to manage and reduce asset risks, you canInsurance Financial AdvisorWith the help of, transfer the funds from the securities investment annuity account to the index annuity insurance account with less volatility;

Similarly, if the market environment is prosperous and higher income potential is pursued, the funds in the index annuity account can also be transferred to a securities investment annuity account, or to a new index annuity product dedicated to asset accumulation.

American Life Insurance Guide©️Always advocate LBYB-"Learn Before You Buy",Study before you buyConcept and provides information onDetailed descriptions and advantages and disadvantages of purchasing annuity insuranceIntroduction and other columns are for reference.

When finally deciding to apply for opening an individual retirement annuity account, you can, with the help of professional financial insurance consultants, evaluate your own comprehensive conditions to find an annuity insurance product that is truly suitable for you, so as to take care of our assets to the utmost extent. (End of full text)

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