Fixed index annuities are a relative newcomer to the annuities industry. For those unfamiliar, fixed index annuities offer some upside from markets, while also putting in a floor on losses. Their sales have surged lately. While volatility from COVID was a strong tailwind for fixed index annuity sales, the other big factor has to do with interest rates. Diversifying holdings into fixed income yields next to nothing, and does not currently offer the de-risking that investors have long sought it for. Couple that reality with the huge mass of Baby Boomers entering retirement and it is clear why fixed index annuities are so sensible right now.
FINSUM: Fixed income just isn’t offering the traditional risk hedge versus equities that it long has. That makes fixed index annuities—with their loss floors and upside participation—the natural replacement.