Fixed Indexed Annuities: Consider the Alternative

From: Zebra Capital Management

• A Fixed Indexed Annuity (“FIA”) is a tax-deferred retirement savings vehicle that eliminates downside risk while allowing for the opportunity to participate in upside market returns.
• FIAs help control financial market risk and mitigate longevity risk.
• In simulation, using dynamic participation rates and uncapped index crediting designs, a generic large cap equity FIA using a large cap equity index outperformed long term bonds with similar risk characteristics and better downside protection over the period 1927-2016.
• An FIA may be an attractive alternative to traditional fixed income options like bonds to accumulate financial assets (tax-deferred) prior to retirement.

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