Structured annuities offer some potential for market growth with reduced downside risk.
After bottoming in March 2009, the S&P 500 climbed more than 550% and sat at record highs at the end of 2021.1 2022 brought new challenges for the equity market though. Market uncertainty creates an understandable desire to find a way to participate in any future increases in the market, while protecting against future downturns.
With structured annuities, investors choose a strategy that provides a level of upside potential and downside protection over a specified term, called the crediting period. Note, however, that greater protection comes with less upside potential.
Each structured annuity allows an investor to customize based on four factors:
Investors have the flexibility to choose a crediting period as short as one year. As long as they renew into a new crediting period within the same contract, interest in the contract grows tax deferred. Thereby, annual savings stay in the account to earn interest and grow savings faster until funds are withdrawn.
Structured annuities were a mere footnote in the annuity industry just five short years ago. Today, they are a fast- growing segment in the market, as baby boomers move into retirement with a desire to protect a portion of their portfolio from market reversals.
Growing choice in this market can lead to complex allocation decisions—fortunately, digital tools and analytics exist today to help make a challenging decision process more straightforward.
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