Myth Busters: Examining the Facts about Index Annuities

Don’t fall for the hype that screams that annuities are too expensive, too complicated and poor performers. Before you turn your nose up at them, take a moment to learn a little more about annuities. You may discover one that is a great option for you.

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For years people have wondered about the use of annuities in their investment and retirement portfolios. In 2019 alone, total deferred annuity sales topped $221 billion, of which a record $73.2 billion were considered fixed index annuities. The increased attraction can be traced to what index annuities offer investors: downside protection coupled with the potential for upside returns associated with various indices.

To learn more about annuities, potential investors often Google and read articles written by firms that do not sell them, which tend to be filled with dramatic language and scare tactics that can obscure the facts. This approach to understanding annuities is what has allowed some common myths to grow over time. The reality is that there are many different types of annuities, and the issues identified in the public domain pertain to some types of annuity programs, but not all of them.

Like a prescription used in medicine, it’s important for all investment vehicles to be used in the right situation by the right person, and for any downsides (similar to potential side effects of prescription drugs) to be understood before proceeding.

Today we will address several myths about index annuities (also known as indexed or sometimes equity indexed annuities) and apply a more fact-based review of their pros and cons than what is widely available on the internet, particularly through ad-sponsored Google searches.


This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

Phil Simonides, CFP®
Senior Vice President, McAdam Financial
Phil Simonides, CFP®, is Senior Vice President at, where he oversees the firm's Washington, D.C. metro, Chicago, Boston and central New Jersey offices. As a member of the executive team, Simonides serves as the Chair of Advanced Planning at the firm, specializing in strategies for high net worth individuals and families, and business owners. He joined McAdam in 2011 after having spent the majority of his 29-year career at Ameriprise Financial.