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Indexed Annuities: 3 Things I Love and Hate About Them

Jason Soloman

The debate about fixed annuities has been going on for years.  Some advisors/insurance agents will only sell indexed annuities to retirees; other advisors/agents won’t associate their name with such products.  I on the other hand believe that for the right person, an indexed annuity could be a piece of a holistic retirement plan.  Listed below are 3 reasons I like and hate indexed annuities.

Things I love About Indexed Annuities 

1. Income For Life

People can bash the Social Security system all they want, but how many people on Social Security are upset when their checks are deposited into the bank?  Not many!  An income for life feature offered by many indexed annuities allows the client to create their own personalize version of Social Security with a twist.  If the client chooses they can activate the income for life rider portion of their annuity and receive income for the rest of their life – regardless of the performance of the actual account.  The twist is that if for some reason (not a high probability scenario), your sequence happens to be during high flying markets (markets that rise fast and far) you could still keep your original investment in tact (past performance is no guarantee of future results and again this is not a high probability scenario).

2. Forced Discipline

We all know that some family members and friends are more comfortable spending money than others.  It’s a lifestyle choice and not my place to judge…but for those people who can sometimes get carried away with their spending indexed annuities can often be the discipline they need.  In the last 10 years, I’ve watched as a few clients took large amounts from their liquid investment accounts not listening advice about the future financial consequences their purchase could cause.  Although there are several ways to access your money in an indexed annuity, there are just enough rules that penalize you for withdrawing too much forcing the investor to think twice before making a compulsive purchase. 

3. Can’t Have a Negative Return

There isn’t much more to say here…it’s a phenomenal feature.  Indexed annuities are not designed to make anyone rich, they are designed to protect retirees from losing but still give them a taste of the market action when things are going well.  Don’t buy an indexed annuity for what it could do for you; buy it because it makes sure you don’t lose money. 

Things I Hate About Indexed Annuities

 1. Front Loaded Commission Structures

Advisors/insurance agents selling fixed indexed annuities have the choice to receive up front commissions that range from 4-10% or a smaller first year commission followed by a lifetime or 10 year trailing commission as long as the client has money in the annuity.  I fully support rewards for hard work; but unfortunately, in some cases, these up front commissions can lead to greedy salespeople over allocating assets into fixed indexed annuities. 

2. Inflation Risk

This is particularly concerning for people to have too much money allocated to annuities.  Receiving $60,000 of income for the rest of your life may sound good today, but if history repeats itself and the cost of milk, bread, gas, and every other necessity rises your $60,000 may not do the trick.  Clients who have all their eggs in the annuity basket often times don’t have a way to increase their income and will be in for a rude awaking when their income is no longer sufficient.

3. Confusion About Income Rider

It’s an 8% roll-up on the income account, not an 8% return.  In fact the minimum guarantee for your investment in most indexed annuities 0-1% per year.  Advisors and agents across the nation misrepresent this benefit and it needs to stop.  If you are buying an annuity and rates are as low as they are today it’s impossible to receive a REAL 8% guarantee on your money.

Now what? If you have a concern about any part of your portfolio then I would suggest getting a second pair of eyes on your investments.  Let a professional learn about your investment goals and determine if the investments you have are in line with your objectives.  Of course you can CALL 980.233.9770 or EMAIL and we will be happy to offer you a FREE 2nd opinion.

To learn more from this annuity professional, simply click here (Jason Soloman).

About the Author:

Jason Soloman began his career in 2001 while attending Western Michigan University when he took a role selling annuities and life insurance with New York Life Insurance Company. Since then, Jason has been in different positions that include managing all aspects (trading, compliance, & client relationship management) of a private hedge fund, financial planning as both a captive and independent advisor, and mentoring other financial advisors. His firm Tactical Investment Advisors, LLC was created to simplify the investment process for investors- especially retirees who are impacted most from poor investment choices.  Jason currently serves clients across the country and his practice is based in the Charlotte, NC area.

Click here and complete the short form to receive the first chapter of my e-Book titled Former Hedge Fund Manager’s 8 Steps to a Successful Retirement.  If you would like help understanding how your annuities or investments will impact your specific situation, just send me an email (…. I will be honored to help you!”


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  • Joe Simonds says:

    Very well balanced review of indexed annuities Jason. It is great to see someone talking about both the pros and cons. Keep up the great work.

  • Jason Soloman says:

    Thanks Joe. It's only fair to present both sides. Educating consumers (and advisors) about both the pros and cons of annuities helps everyone involved make a more informed decision/recommendation.

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