By Marc Gilman
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Key Takeaways
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A Wall Street Journal story (Oct. 10, 2026) put indexed annuities in the spotlight. It describes how insurers can change the terms that decide how much of an index’s gain you receive, and how the products have grown alongside private asset managers’ ownership of insurers.
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“No market losses” is not the same as “market returns.” An indexed annuity protects your principal from index declines, but your credited interest depends on terms such as participation rate, cap and spread.
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Those terms may be reset after you buy. The WSJ example shows a participation rate lowered twice over 12 years. Your own contract sets the limits, so find out what they are before you sign.
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The article is one person’s story, and the insurer disagrees with how it was measured. It is a useful reminder of what to ask, not a verdict on every product.
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Ask for the guaranteed minimums in writing. Also ask about surrender charges, rider fees and how your agent is paid.
What Did the Wall Street Journal Report?
A Wall Street Journal article by Heather Gillers, “The Sleepy Insurance Product That Came to Power Private Credit’s Ascent,” looks at indexed annuities and the private asset managers that now own many of the insurers who issue them. Much of it is about the investment side of the industry. For a consumer, the part that matters most is what happened to one policyholder.
According to the WSJ, a Florida woman put $40,000 into an indexed annuity with a 12-year term. In year one, 60% of her money earned returns tied to the S&P 500, minus a 2.9-percentage-point spread, and the rest earned a fixed 1%. The insurer later lowered the 60% share to 55% in year seven and to 45% in year 11. She also paid for optional add-ons that she never used, which the article says reduced her annual return by about 2 percentage points.
Over the 12 years, her annualized return was 3.7%. The article compares that with 1.9% from Treasurys and 13% for the S&P 500 over the same period. When the policy matured, she moved the money to a traditional fixed annuity that the article says guarantees 5.85% a year.
The insurer, Athene, told the WSJ the annuity “performed exceptionally well” compared with similar safe alternatives, with 100% principal protection and optional lifetime income, and that comparing it with a strong stock market during a period of historically low rates is “highly misleading.” Both points are fair to keep in mind. One policy, in one rate and market period, doesn’t tell you what any other contract will do.
How Does an Indexed Annuity Work, and What Can Change?
An indexed annuity (also called a fixed indexed annuity) credits interest based partly on the performance of a market index, such as the S&P 500, while protecting your principal from index losses. It is not invested directly in the market. How much interest you are credited is set by formulas, and the three that matter most are:
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Participation rate: the share of the index’s gain that counts toward your interest.
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Cap: the most interest you can be credited in a period, regardless of how high the index goes.
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Spread (or margin): a percentage subtracted from the index gain before interest is credited.
According to the WSJ, insurers can change these terms during the life of the policy. In practice, most contracts say how often they can be changed and set a minimum or maximum, so the exact limits are in your contract. If the insurer can lower your participation rate or cap, it can reduce what you are credited in future periods, even though your principal remains protected from index declines.
Why Does the Industry’s Ownership Matter to a Policyholder?
The WSJ reports that private asset managers have bought many insurers, and that indexed annuities are attractive to them because they typically last about a decade, compared with three to five years for fixed-rate annuities. The article says indexed annuities now account for nearly $200 billion in reserves at insurers owned by private asset managers, according to AM Best, and that indexed annuity sales were $128 billion in 2025, up from $96 billion in 2023.
For you as a buyer, the practical point is that the insurer’s investments and the terms it offers are connected. Your annuity’s guarantees are backed by the claims-paying ability of the insurer, so the insurer’s financial strength matters. Rating agencies publish ratings for insurers, and your state guaranty association provides limited protection if an insurer fails.
How Are Agents Paid, and Why Should I Ask?
The WSJ says indexed annuities are sold by state-licensed insurance agents, who aren’t subject to the same rules as securities brokers on disclosing conflicts of interest, and that commissions on some indexed annuities are higher than on simpler fixed-rate annuities. It cites an example of 5% to 7% on certain 10-year indexed annuities, versus about 3% on simpler fixed annuities from the same company. The WSJ says insurers attribute the higher commissions to the products’ complexity, which takes more explanation. The American Council of Life Insurers told the WSJ that state rules for agents are modeled on federal requirements for securities brokers and that insurers must take steps to make sure agents sell suitable products.
Whatever the rules, it is reasonable to ask any agent: “How are you paid on this product, and does that differ from the alternatives?” A good agent should answer plainly.
What Questions Should I Ask Before Buying an Indexed Annuity?
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What are the minimum guaranteed participation rate, cap and spread? Ask for them in writing, not just the current rates.
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How often can the insurer change them? Annually, at each term, or another schedule.
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How long is the surrender period, and what are the charges? Know the cost of leaving early.
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What do the riders cost? The WSJ example says add-ons lowered annual returns by about 2 percentage points. Ask for the annual fee and whether you will realistically use the benefit.
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What does the illustration assume? Hypothetical illustrations based on past index performance, or on a newly created index, aren’t predictions. The WSJ cites one educational piece that shows $100,000 growing to $2.7 million over 21 years using hypothetical data. Ask for conservative scenarios, not only the best case.
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How is the insurer rated, and who owns it?
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How are you, the agent, paid?
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What would a simpler product look like? For example, a multi-year guaranteed annuity (MYGA) pays a fixed rate for a set term, so there are no formulas to change. It has its own trade-offs, including surrender charges, and rates available today may not last. We discussed how fixed annuities differ from bonds in our recent post on Jim Bianco’s bond outlook.
So Should I Avoid Indexed Annuities?
Not automatically. Some people value principal protection plus a chance at higher interest than a fixed rate, accept limits on their upside, and plan to leave the money alone through the surrender period. Others prefer a known fixed rate, a different type of product, or no annuity at all. The WSJ story shows why the details matter: the contract’s terms, the fees, the time horizon and how you plan to use the money.
Where Does Insurance Planning Fit In?
An annuity should fit a plan: your income needs, other assets, taxes, health and how long you can leave the money untouched. We start there, show you how the options we offer compare, including the guaranteed minimums and costs, and talk about whether any of them make sense. We can also work alongside your financial advisor and tax professional.
What To Do Next
If you own an indexed annuity and want to understand its current terms, or you’re considering buying one, we are happy to walk through the contract with you.
Questions? Call (800) 927-9326 or email
Prefer we reach out to you instead? Complete our Permission to Contact form and a licensed Gilman Agency agent will follow up.
Source: Heather Gillers, “The Sleepy Insurance Product That Came to Power Private Credit’s Ascent,” The Wall Street Journal (updated Oct. 10, 2026). Figures and quotations are as reported by the WSJ, including statements from the insurer, insurers generally and the American Council of Life Insurers, and are about one policy and the industry in general. Your results and terms will differ.
Gilman Agency is not affiliated with or endorsed by The Wall Street Journal, Athene or any insurer named in the article. This article is for general educational purposes and is not investment, tax or legal advice, a recommendation to buy or sell any annuity or security, or an offer of coverage. Annuity guarantees are backed by the claims-paying ability of the issuing insurance company and are subject to costs, surrender charges and limitations. Indexed annuities are not direct investments in the market or an index, and they are not FDIC-insured or bank guaranteed. Participation rates, caps, spreads and credited rates can change as the contract allows and vary by company and product. Tax rules change. We do not offer every plan or product available in your area. Consult a licensed insurance professional, financial advisor and tax advisor regarding your specific situation.
