Indexed annuities are seemingly just one option from the vast annuities market available to advisors. That said, they fill a unique and interesting role. At their most basic level indexed annuities have payouts tied to the performance of specific indexes. This can be good because they can offer more income than fixed annuities, but they also come with caps that mean you don’t get to participate in anything close to the full upside of the market. If you want a little more potential return, buffered annuities are a good idea. They offer more upside on index returns in exchange for more risk on the part of investors. The “buffer” is essentially a contractual mitigation of losses. For example, if the market loses 30% in a given year, a 10% buffer means the annuity holder would on lose 20%.
FINSUM: These are essentially a more aggressive type of annuity that offers higher payouts and more risk than traditional fixed annuities. These are a good option for those who have the freedom to try to achieve more upside, or those who are afraid of inflation.