When evaluating an annuity, the advisor typically presents an illustration that outlines future values and any applicable surrender charges.

For a multi-year guaranteed annuity (MYGA), focusing solely on guaranteed values without much variability, except for potential market-value-adjustment penalties during the surrender period. On the other hand, a fixed indexed annuity features a more complex illustration, including guaranteed cash values and hypothetical future values based on favorable market performance. These annuities earn interest tied to changes in a market index like the S&P 500, offering the security of principal protection even if the index declines. However, the growth is limited, as you will only receive a portion of the index gains.

Understanding the specifics of these illustrations is vital, particularly distinguishing between the different types of value presented to clients.  

Finsum: Annuities can be complex but understanding your client’s interest can put them in the perfect vehicle.