What Is The Average Rate Of Return On An Index Annuity?

Shawn Plummer

CEO, The Annuity Expert

Index Annuity Average Returns

The average rate of return on an index annuity typically ranges between 5% to 7% over the entire annuity contract. However, this does not imply an annual return rate but an average over the life of the annuity. Fixed Indexed Annuities (FIAs) can potentially offer higher returns, sometimes over 20%. In exceptional cases, returns can be as high as 24% in a single year. However, it’s important to note that these higher returns are not guaranteed and depend on various factors, including market performance and the specific terms of the annuity contract.

What Is The Average Return On An Indexed Annuity?

This image is a snapshot of one of my index annuity annual statements to prove that the upside potential can be attained with the proper index annuity.

Understanding Index Annuities

What is an Index Annuity?

  • A financial product that offers a return based on a stock market index, like the S&P 500.

Key Features

Average Returns

  • Generally, 5% to 7% over the life of the contract.
  • Can be higher in certain FIAs, but varies based on market conditions.

Factors Influencing Returns

  • Market Performance: Higher market gains can lead to higher returns.
  • Cap Rates: Limits set by the annuity contract on the maximum return.
  • Participation Rates: The percentage of index gain credited to the annuity.

Considerations Before Investing

  1. Risk Tolerance: Understand your comfort with market-linked products.
  2. Investment Goals: Align the annuity with your long-term financial objectives.
  3. Contract Terms: Carefully review cap rates, participation rates, and fees.
  4. Market Conditions: Be aware that returns can fluctuate based on market performance.


While index annuities can offer attractive returns, it’s crucial to understand their structure and how they align with your financial goals. Returns can vary widely based on market conditions and specific contract terms. For personalized advice and to explore options that best suit your needs, contact us today for a free quote.

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Shawn Plummer

CEO, The Annuity Expert

Shawn Plummer is a licensed financial professional, insurance agent, and annuity broker with over 14 years of first-hand experience with annuities and insurance. Since beginning his journey in 2009, he has been pivotal in selling and educating about annuities and insurance products. Still, he has also played an instrumental role in training financial advisors for a prestigious Fortune Global 500 insurance company, Allianz. His insights and expertise have made him a sought-after voice in the industry, leading to features in renowned publications such as Time Magazine, Bloomberg, Entrepreneur, Yahoo! Finance, MSN, SmartAsset, The Simple Dollar, U.S. News and World Report, Women’s Health Magazine, and many more. Shawn’s driving ambition? To simplify retirement planning, he ensures his clients understand their choices and secure the best insurance coverage at unbeatable rates.

The Annuity Expert is an independent online insurance agency servicing consumers across the United States. The goal is to help you take the guesswork out of retirement planning and find the best insurance coverage at the cheapest rates

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