Build Your Own Annuity

I’ve often pointed out that people can build their own indexed annuity, receiving most of the benefits of commercial annuities at less cost, to the consternation of some insurance agents. Yet, you can use strategies similar to those used by insurers to generate the same guarantees and returns in your own accounts. You don’t have to take my word for it. Here’s an article explaining in detail several ways you can do this. Note that these annuities are for the accumulation phase of investing. You need an insurer to have the guarantee of lifetime income available from an immediate annuity or a variable annuity with living benefits.

Despite an EIA’s complexity, it’s actually quite easy to create a financial structure that mimics their desirable features. We can learn a considerable amount by exploring these types of portfolios. An EIA-like portfolio consists of an income and a capital appreciation part. I will examine each of these in turn.