3 Key Facts about Buffer Annuity

3 Key Facts about Buffer Annuity

Discover the top three essential facts about Buffer Annuities:

What is a Buffer Annuity?

Buffer annuities, also known as variable indexed annuities, blend features of both variable and indexed annuities. Here’s a brief overview of the distinctions:

  • Variable Annuity:
    • Offers investment options in subaccounts (stocks, bonds, or mutual funds).
    • Gains are tax-deferred until withdrawals.
    • Potential loss if subaccounts perform poorly.
  • Indexed Annuity:
    • Provides interest tied to S&P 500 growth.
    • Interest percentage capped (e.g., 5% or 6%).
    • No loss if the index experiences a loss.
  • Buffer (Variable Indexed) Annuity:
    • Ties growth or loss to various investments (options contracts, REIT indexes, etc.).
    • Higher growth cap (usually 8% or 9%).
    • Potential loss mitigated by a “buffer” percentage.
    • Returns linked to a stock market index over a limited period.

How a Buffer Annuity Works


  • Allows investors to choose segments linked to market indexes.
  • Examples include S&P 500, NASDAQ 100, and Russell 2000.


  1. Choose an Index:
    • Select an index to track performance.
  2. Set Segment Duration and Buffer:
    • Choose segment duration (1-6 years).
    • Select a segment buffer (e.g., -10%, -15%, etc.).
  3. Protection and Limitations:
    • Segment buffer provides built-in protection against selected loss percentage.
    • Investor absorbs losses exceeding the buffer limit.
    • Earnings on the protected portion are subject to a cap.

Risk Considerations:

  • While part of the account is insulated from market loss, earnings are capped.
  • Exposure to market downturns; potential loss of principal.
  • Important to review risk tolerance before investing.

Buffer Annuities and Indexed Annuities

  • Downside Protection:
    • Buffer annuities provide partial protection against losses.
    • Example: A 10% buffer means the insurance company absorbs the first 10% of losses.
  • Caps and Risks:
    • Caps (8-9%) limit credited interest.
    • Riskier than indexed annuities but offer higher caps.
    • Clients can participate more in market gains.
  • Considerations:
    • Clients seeking income protection in retirement should weigh risks.
    • Buffer annuities focus on accumulation value, not stable retirement income.

Mintco Financial Retirement Planning

  • Your investment portfolio is just one aspect of your financial plan.
  • Complete understanding allows us to manage your wealth effectively.

Financial Planning

  • Ongoing pursuit of various issues to maximize overall financial situation.
  • Tailored to your needs: retirement planning, estate planning, tax planning, and more.

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