Index Annuities have their returns tied to the stock market. In most cases, the performance is based on the S&P 500 index. However, index annuities do not perfectly mirror the S&P 500. In fact, all index annuities have a performance floor (minimum annual gain). The floor is usually around 1%. They also have a mechanism which limits upside performance. Below, we compare the 12 month performance of 4 common types of Index annuities, with typical characteristics of each type. First lets start with the performance of the underlying index.
How did the S&P 500 do last month?
How did the S&P do over the last 12 months?
Trigger Point Outperforms Markets & Other Types of Index Annuities
| Index Annuity Type | Performance |
| Trigger Point | 5.00%* |
| Annual Point To Point | 2.04% |
| 80% Participation Rate | 1.63% |
| Monthly Point To Point | 1.00% |
Assumptions:
80% Participation Rate: The performance of the S&P 500 was multiplied by 0.8. However, the actual participation rate will vary from one annuity to another. There was assumed performance cap.
Monthly Point To Point: There was an assumed monthly performance cap of 3% which limited performance in several months. After adding up monthly gains and losses, the annuity finished down 6.11%. However, an assumed performance floor of 1.0% led to final return being positive.
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