PT - JOURNAL ARTICLE AU - W. Cris Lewis TI - A Return-Risk Evaluation of an Indexed Annuity Investment AID - 10.3905/jwm.2005.470613 DP - 2005 Jan 31 TA - The Journal of Wealth Management PG - 43--50 VI - 7 IP - 4 4099 - https://pm-research.com/content/7/4/43.short 4100 - https://pm-research.com/content/7/4/43.full AB - This article focuses on a relatively new investment option, an indexed annuity account offered by at least one insurance company, which combines U.S. Treasury bonds with options on the S&P 500 Index that guarantees a minimum return of 2.7% per year and a maximum return (or cap return) equal to the 52-week percentage change in the S&P 500 Index following the date of purchase but no more than a return set by management which has been 8% or 9% in the past two years. (Contractually, the cap return cannot be less than 5% per year.) Using simulated investment results for 10-, 20-, and 30-year holding periods using actual rate-of-return data for the period 1946-2003, the author demonstrates that a hypothetical index annuity account does provide a relatively low-risk investment, although the cost, in terms of forgone returns on a pure equity investment, is relatively high. When the cap return was set at 9%, the index annuity account generally achieved higher returns and lower risk than did a long-term U.S. government bond investment.