Another Look at “Indexed Annuities: Consider the Alternative”
We continue to talk about, and continue to get requests for, a whitepaper titled “Fixed Indexed Annuities: Consider the Alternative” written by Roger Ibbotson, PhD. For those that are not familiar with Dr. Ibbotson he is Chairman & Chief Investment Officer of Zebra Capital Management and Professor Emeritus of Finance at Yale School of Management. In this whitepaper you’ll find a detailed analysis from a respected authority that compares and contrasts fixed indexed annuities, long term government bonds and large cap stocks as viable asset classes in the construction of a diversified portfolio.
As part of his analysis, Ibbotson offers hypothetical net return comparisons of each of these that include charting and graphics that clearly illustrate each of his points. In his concluding remarks Ibbotson refers to annuities as an asset class that “have for a long time deserved a place in retirement portfolios, and the evolution of the industry has made these vehicles more flexible and attractive” and the fixed indexed annuity as a product with “many attractive features as both an accumulation investment and as a potential source of income in retirement”.
As you review this whitepaper, you’ll note references to the importance of de-risking portfolios as retirement grows near and specific note of the benefits of the downside protection offered by annuities. All in all an objective and thorough look at annuities as an alternative to bond-like investments that deserves another look!