Granted, not all insurance providers have these draconian provisions in their indexed annuities, but it can be hard for ordinary investors even to find out about potential negatives from the voluminous paperwork that accompanies sales pitches. In addition, surrender charges of as much as 20% can apply with some annuities if you pull money out within a 10-year period of buying the annuity. Annual expenses can eat into returns, and the expenses involved with guaranteed income riders add even more cost to the equation. Others limit returns by paying only a percentage of the market's overall gains. Many indexed annuities have to put caps on the maximum amount you can earn in any given year, leaving annuity holders badly lagging market returns in strong years like 2013's 32% gains for the S&P 500 ( ^GSPC -4.32%). Why indexed annuities sometimes fall short Unfortunately, the reality of how indexed annuities actually work often leaves them missing the mark in terms of being a perfect investment solution for many people.

Indeed, according to figures from the Indexed Annuity Leadership Council, fixed indexed annuities have attracted about $400 billion from customers in the 20 years since they were first offered, and annuity providers see them as a potential replacement for the disappearance of employer-sponsored pension plans. Obviously, the chance to earn strong returns from stock-linked investments while avoiding any possible risk to principal is extremely appealing. With the rest, the insurer can buy stock options to participate in a portion of a stock market index's upside. In order to guarantee no loss of principal, an insurance company can invest in bonds that will pay out a certain amount at the annuity's maturity. The financial structure of a typical indexed annuity is relatively simple. Gains with no losses.' He also notes that the insurance companies that sell indexed annuities also provide access to guaranteed income riders, which will allow you to set up streams of income later in life. As Robbins describes the setup of the typical indexed annuity, 'These structures offer upside without the downside.

The key to his process involves creating income for life, and one of the products that Robbins talks about is the indexed annuity. Looking for a guarantee In his book Money: Master the Game, Robbins goes through several steps he sees as essential to reaching financial freedom.

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