3 Logical Insights Into the Notion of ‘Guaranteed’ Annuities

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“A lie gets halfway around the world before the truth has a chance to get its pants on.” -Winston Churchill. 

In my first article in this series, I discussed the logic of index annuities, which most investors – and even many advisors – don’t understand.  Logically, in my view, if annuity products were more beneficial to clients than an apples-to-apples open market investment, then all insurance companies’ annuity departments would logically go bankrupt because they couldn’t make enough of a spread between actual market returns and the returns that the annuity contracts stipulate. This month’s topic is a follow-up as I tackle the word “guaranteed.” It seems these days that insurance companies find some way to attach the word “guaranteed” to almost every product, no matter the form, shape or benefit that the product provides. The insurers know that as long as a broker can indirectly use the word “guaranteed” with potential investors in any assumed fashion, products will get sold. So what does logic tell us about the broad analysis of most guaranteed annuities? 

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