When it comes to annuities, the crediting or allocation method is like the motor of the vehicle you're purchasing. Imagine a fixed indexed annuity as a vehicle and the crediting or allocation method you choose as the formula for calculating returns on all of your deposited money.

We know annuities can seem complicated and that's why we prioritize clarity, pragmatism, and transparency. As mentioned, we've created an annuity allocation backtester that takes the guesswork out of choosing products for you and your family.

And yes, you can put money into more than one crediting or allocation method within an annuity. But keep in mind, if you do, you'll receive a mitigated return to the proportion you put into each method.

One of the biggest problems with allocation methods is that many of them are based on indices that don't have a stable pricing history or future. Another problem is that some allocation methods promise extremely high multiplier returns on low-performing indices.

To stay on the cutting edge, we have developed a patent-pending artificially intelligent annuity testing model that we have used internally for nearly a decade.

Our allocation historical backtester allows us to go back in time and evaluate what would have happened if we purchased one annuity every day for 10-60 years and average returns. This helps us identify from a hindsight analysis which allocation methods are capable, although not guaranteed, to make higher returns versus those that may be subject to a Date Lottery issue, meaning you can purchase one annuity and have a radically different experience than someone who purchases the same product on a different day.

While some people have had bad experiences with Date Lottery issues in the past, we have been able to eviscerate the Date Lottery with our methodology and technology, through appropriate strategy and management.

At our company, we refuse to waste time backtesting annuities that use newer indices without significant historical track records. Instead, we track the results of people who purchased these contracts and use that information to inform our product selection methodology.

We also don't hypothetically backtest any "non-real money, safety net," typically known as minimum guaranteed annuitization value, because it's not real money and would be deceptive to compare it to actual cash accumulation value. Companies will not pay you the guaranteed minimum annuitization value under any circumstances in a lump sum, even after the surrender charges run out, because it is not intended to be paid to you. It is not cash money, so it should not be compared against actual cash accumulation value, which is a totally completely different thing.

Our focus is on the actual performance of real money in the same account. We believe that spending too much time focusing on the guaranteed minimum value can distract consumers from what matters most: the actual returns on their annuities.

While some annuities offer guaranteed minimum values and rider options, many of these contracts have allocation methods that are prone to the Date Lottery and are not competitive with accumulation-based products. We believe these contracts are sold because people are comforted by the guaranteed minimum values and rider options, but after purchasing the contract, the company may be authorized to reduce current rates, which can negatively affect long-term returns.

At our company, we prioritize transparency and making sure you have all the information you need to make an informed decision about annuities.

Most annuity products have an allocation method that is highly vulnerable to the Date Lottery and is not competitive with accumulation-based products. People may be comforted by the guaranteed minimum values and the extra rider protection against losing a Date Lottery and experiencing poor returns, but this false sense of security is not worth the risk.

Typically the insurance company selling the annuity contract has the power to reduce current rates after the purchase, which can severely impact long-term client returns. Losing the Date Lottery is not the only factor affecting annuity returns; the company's systematic reduction of current rates and caps will make it highly unlikely for the client's actual cash value to exceed the guaranteed minimum annuitization value.

In such cases, the insurance company may encourage the client to hand over their actual account balance, which is valued much less than the non-money guaranteed minimum annuitization factor, to get a higher monthly payment. If the company does receive the account balance, they may retain the remainder of the client's life savings after the death of the last beneficiary receiving monthly payments. This is not an attractive paradigm for us.

We only deal with companies that have a long-term track record of honoring their original participation rates within defined parameters. We know all this because we deposit our own money in the products that we recommend. If a client asked us to purchase a contract that we do not believe in or have not purchased ourselves, we will refuse to sell it to them. Our reputation is our most valuable asset, and we do not want to risk it by selling a product that we do not believe will satisfy the client long-term.

We caution people purchasing income rider contracts that if inflation ever rises, which it frequently does, it could have an ugly impact on the contract's performance. It's important to be pragmatic and think long-term when purchasing annuity products.

Many people who have purchased annuities are facing a problem where their buying power is decreasing every year due to inflation. The annuity payout they receive does not take into account the current high inflation rates.

Annuities offer different allocation methods, and one of the earlier methods was the annual capped point-to-point method. This method credits the client with the growth of the Standard & Poor's 500 index up to a maximum limit of 10%. This method offers protection of principal to the downside, but it does not perform well compared to other uncapped methods. It is also subject to timing issues where a person can have the market up 30% all year but the day before their anniversary the market can fall 50%.

Another method called the Performance Trigger was created to compete against other methods. This method offered a higher fixed interest rate than what was currently available. For example, if the going fixed interest rate a client could choose to receive in cash was 3%, the Performance Trigger might be 6%.

Overall, while the capped point to point method was viable at one point, it is not useful today due to Date Lottery issues and limited returns. The Performance Trigger method, on the other hand, offers a higher fixed interest rate but may not be as competitive as other uncapped methods. If the market goes down, there's no credit. This feature became popular because people were usually happy to get more than they expected. However, it has limited upside and can be affected by the "Date Lottery," which means that the performance of the annuity can be different depending on when you bought it. An inverse performance trigger is a similar feature that pays out if the market falls.

There are advantages and disadvantages to using a Performance Trigger. The advantage is that it can credit higher than fixed interest rates and usually pays out in a flat market. The disadvantage is that it has limited upside and can be affected by the Date Lottery.

Your experience with an annuity will depend on many factors, including the allocation options you choose and the date you buy it. The "Date Lottery" has been largely solved, but it's still important to understand its effects. The Averill family portfolio does not use performance triggers or inverse Performance Triggers in any annuity strategy.