Indexed Annuity Reset Unplugged-Making the Intangible Tangible

annuity ratesYou know the greatest storyteller in history was a carpenter. Jesus told stories in parables so people could understand the complex.  So it is with one of the fastest growing products, fixed indexed annuities in this Age of Safety or New Normal as some analysts would call it. I never forget why the good Lord put the first four letters of the word analyst in the world because he who forecasts by the crystal ball tends to eat glass! Or consider, the first five letters of word broker!


 Today, I will use a carpenters ruler to demonstrate how the POWER of annual reset provides your savers and investors who have abandoned the market in droves, capture gains and keep those gains at a time when it is critical to have some assets allocated to Growth but not on a roller coaster. I am reminded of my first trip to the famed Tennessee Tornado rollercoaster at Dollywood. It is scary enough riding up to the first big rise and drop and then zigging and zagging  like the market has done through 12 years. Then the lights are turned off at the top of the first peak. How many of you have felt like you have been zigging and zagging through ups and downs and that the lights have been turned out even though your broker keeps telling you to hang on and you will return back to where you started. Annual reset makes allocation in an FIA or fixed index annuity more like a merry go round where, just like a direct investment in the market,  I can pick the ponies or allocations I make but always BE ASSURED, subject to insurer solvency,  that my ponies OR INDICES can go up like a carousel but never down below where I started and even enable me to lock in some participation in market gains when they occur like the last four years when the  market more than doubled. What annual reset and the minimum guarantees of a fixed annuity also do is ensure me that I have reduced the risk of losing those gains like in 2001-2003 and 2007 to 2009.,Let’s see how annual reset works using the old carpenter ruler and presume that the market performs at a level that it has on an average annual basis ,according to Jeremy Siegel,  for the last 200 years before inflation of 8%. If I was participating in a fixed indexed annuity with an annual point to point cap rate of 4% with 100% participation, I would capture  4% gains that I can never lose.



Annual Reset is the exclusive differentiator between FIAs and all other products like structured CDs, notes, REITS, and of course mutual funds or ETFS. If the market goes down (demonstrate with your ruler), I am locked in at $ 104,000 CSV on my original $100,000 savings. Will Rogers, a humorist in the Depression of the 1930s, said he was not so concerned about a return of his principal but a return of his principal. Rogers died in a plane crash in the 1930s trying to fly over the North Pole at age 59 and did not have to face a possible 30 years of having generate retirement income and worry that it could all evaporate in the vapor of a market downturn like we’ve seen 3 times in my lifetime. Rest assured that when you begin to take income and your account value is up that growth is locked up as well because of annual reset so that I can draw down income that may even be protected against inflation as well through a rider and the beauty of annual reset continues working the same way assuring me that I can now get appreciation on an asset like an annuity that is designed to provide tax deferred Income and safety but at my direction as an annuitant depreciate in time on my schedule without the worry of losing money. That’s peace of mind would you agree? You can even more creative and use parts of the ruler to demonstrate, how income can be pulled out of the contract for chronic illness, at home care and nursing home care.


The late Zig Ziglar who passed away last year said you have to show a prospect the way the pots and pans work that they have before you can show them how the new ones work. There are a lot of spins on the concept of a fixed indexed annuity but the annual reset remains the very best and most important feature of an indexed annuity. Show it and Grow it Now!



Tennessee Tornado

Tennessee Tornado (Photo credit: Wikipedia)


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One comment

  • Hello, guest
  • I have owned some annuities since I was 25. I have always maintained that I as well as my clients need some "sleep well at night money", since CDs have no real attractive yield I have found the Fixed Indexed Annuity to be a fantastic replacement. I also love knowing that at any moment the insurance company is obligated to pay me lifetime income. Although I do keep money directly invested in the market I love the Fixed Indexed Annuity for the safety and security hedge to add to my market portfolio. I could not be more pleased with the product concept. I hope other advisors are giving their clients the opportunity to learn about these products.