Indexed Annuities
But other annuities may also serve as low-risk options for improving yields.
"Annuities that allow participation in market-like returns while providing contractual guarantees against loss can boost a retiree’s return on that still-safe portion of their portfolio," said Martin Powell, head of annuity distribution at CUNA Mutual Group in Madison, Wisc.
A popular example is the fixed indexed annuity (FIA). Frank O’Connor, vice president of research at the Insured Retirement Institute in Washington, D.C., said FIAs can offer "a higher return than comparably termed CDs, and since the crediting rate is derived from changes in price of one or more market indexes, rather than prevailing interest rates, they don’t carry the interest rate risk of government or corporate bonds."
In addition, FIAs "typically protect principal while offering the best opportunity to outperform inflation and grow savings," said Paula Nelson, co-head of individual markets at Global Atlantic in Minneapolis.
Other Structured Or Buffered Products
For those who can stomach a little more risk, Eric Henderson, president of Nationwide Annuity at Nationwide Financial in Columbus, Ohio, points to registered index-linked annuities (RILAs). In general, RILAs differ from FIAs in that they offer less downside protection in exchange for a more generous cap.
"While RILAs don’t provide full principal protection like FIAs," he said, "clients can still benefit from a level of protection."
Last year, RILA sales surged 37% from the prior year, as measured by the Secure Retirement Institute. "The appeal is being able to access more of the growth potential of equities, with a partial buffer against market corrections," explained Pete Golden, chief sales and distribution officer for individual retirement at New York-based Equitable, which pioneered RILAs in 2010.
These products, said Brian Kroll, head of annuity solutions at Radnor, Pa.-based Lincoln Financial Group, are "uniquely designed to do just this."