Fact Check: Primary Benefit of Fixed Index Annuities

Updated: November 24, 2024 5:42 pm
5 min read
Aaron Winston, Strategy Director at Express Legal Funding.
Aaron R. Winston, PhD
Author & Strategy Director

Keypoints

This article fact-checks the primary benefit of fixed index annuities, debunking the claim that they are primarily for growing wealth. Instead, the article states their main purpose is to provide guaranteed future income, often with returns lower than inflation. It emphasizes that fixed index annuities are better suited for ensuring a steady income in later life rather than significant wealth growth.

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Fact Check: Primary Benefit of Fixed Index Annuities
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Fact check: "The primary benefit of fixed index annuities is growing your money."
Author:
Aaron R. Winston
Published Date:
September 27, 2023
Last Updated Date:
November 24, 2024 5:42 pm
Publisher:
Express Legal Funding
Copyright Owner:
© Unkown Entity Holdings, LLC

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Claim: The primary benefit of fixed index annuities is growing your money.

Claimed By: AnnuityAdvantage

The claim made by AnnuityAdvantage that the primary benefit of a consumer purchasing a fixed index annuity (FIA) is to grow their money is false. The statement is inaccurate because it would be ill-advised to buy this type of annuity to grow one’s wealth and become more affluent.

It is a bad deal if the investor’s primary goal is to increase their wealth. For instance, if a healthy 30-year-old seeks to grow their net worth by saving money each month, purchasing a fixed index annuity will not likely accomplish that.

The primary purpose of a fixed index annuity is to guarantee future income and provide a return, generally less than the rate of inflation. The guarantee of not losing money when the market goes down comes at a significant price.

Index annuities that credit return tied to the S&P 500 index calculate the change in the price of the S&P 500, often on an average month to month or year to year. The dividends of the S&P 500 are not given to the policyholder, and often, there are caps on the returns.

If the S&P 500 change in value goes up 10%, there is a much lower cap or restrictive participation percent on what the policyholder actually receives.

Furthering this point, when it comes to taking income from the index annuity, the income is quoted at an attractive 7.50%! What is not disclosed is that a portion of the 7.50% is the return of the principal.

The initial investment is not guaranteed to remain once the owner starts taking an income. Only the income is guaranteed. What remains for beneficiaries could be significantly less or none at all.

The following can be a helpful way to think of it: The essence of these annuity plans is to ensure that the individual and/or their spouse will continue to have a stream of income later in life, which is the inverse of a life insurance policy that involves the insurance companies’ actuaries estimating when they think the beneficiary will die.

Unlike life insurance, people who purchase fixed index annuities will benefit more when they live a long time.

It ends up extra worthwhile for the life insurance policyholder when they pass away much earlier than expected since the beneficiaries will get a payout while they make fewer monthly premium payments.

In summary, the primary benefit of a fixed index annuity is not to grow your money to any significant extent. Instead, it is an insurance contract to guarantee future income.

Fact Check By: Express Legal Funding

Disclaimer: Express Legal Funding is a pre-settlement funding company and is not a law firm. While the content on this page is well-researched and reviewed by licensed attorneys, it does not constitute legal advice and should not be considered a substitute for legal representation.

About the Author

Aaron R. Winston, PhD

Aaron Winston, PhD, is the Strategy Director of Express Legal Funding. Widely recognized as “The Legal Funding Expert,” Aaron Winston brings over a decade of experience in the consumer finance industry, including years as a consultant to a leading financial advisory firm managing more than $400 million in client assets.

Aaron Winston is a respected author, strategist, and legal content innovator whose SEO-focused research spans multiple industries. He earned the title “The Legal Funding Expert” by writing authoritative, well-researched guides and blog posts on pre-settlement funding, legal finance, and law firm marketing. His articles attract tens of thousands of readers every month and include some of the most widely read content in the lawsuit funding space.

As a PhD holder in Legal Technology, Aaron Winston applies academic rigor to real-world consumer finance issues. In his role at Express Legal Funding, he has dedicated thousands of hours to educating plaintiffs, empowering attorneys, and advancing ethical standards in the legal funding industry.

Aaron Winston is also the author of A Word For The Wise. A Warning For The Stupid. Canons of Conduct—a 2023 poetry book of 35 original canons focused on values-driven conduct and strategic thinking.

In early 2022, Aaron Winston earned top 5% recognition in LinkedIn’s SEO skills assessment and holds verified skills badges in both SEO and Google Ads. His unique slogans and company trademarks are registered with the United States Patent and Trademark Office, reflecting his attention to brand integrity and thought leadership.

Aaron Winston has been featured in multiple high-profile interviews and industry case studies, including a 2021 smith.ai interview and a 2022 legal funding company growth report. In 2023, WordLift highlighted Aaron and Express Legal Funding in a leading SEO author case study for exceptional performance in legal content marketing and E-E-A-T standards. In 2024, a separate case study by Kinsta showcased Aaron Winston’s technical SEO and content scalability methods, further cementing his role as a pioneer in organic legal content strategy.

Born in Lubbock, Texas, and raised in Dallas, Aaron Winston attended Akiba Academy and continues to combine academic insight with forward-thinking innovation. His work at the intersection of law, technology, and consumer advocacy continues to drive meaningful change in how legal funding is understood and accessed.

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