Should a young person consider buying an index annuity?

No. A young person should be heavily weighted in stocks if he is investing for the long term.
HI, your friendly insurance guy here again. :)

Contrary to what some other posters have said, annuities are not "the worst investment you can make." No investment is "the worst investment you can make." Each has its place and can be effective within an appropriate strategy.

Annuities are typically not as valuable to a younger investor as to an older one.

Let's get the downside of annuities out of the way right off the bat:
They have higher costs than most other investments.

So why is that? It's because they, unlike other investments, can offer certain advantages, and you pay for them. These advantages can be in the form of guarantees like a GMIB (buarantees X% per year no matter what the market does), ability to pass on the contract value to your beneficiaries without going through probate, and others specific to each annuity.

So what are the upsides? The available guarantees, ability to avoid probate, and tax deferral.

Since a young person who invests for the long term will typically, over a lifetime, exceed the guaranteed returns in some annuities, it's usually not worth the higher costs for a young investor to use annuities.

Annuities are best used in the following cases:

1. Investor has already maxxed out conventional retirement plans like a 401(k) and Roth and wants another tax-favored vehicle to put money into.

2. Investor is 45+ and wants an investment where he or she can try for high returns with investments with built in safety.

3. Investor has big money and wants to invest more than traditional vehicles allow (most annuities have caps higher than a million dollars).

4. Investor has a specific need for a particular guarantee only available through an annuity.

There are other cases, but those are the most common.

When choosing an annuity, Indexed ones are the most complex and hardest to understand. Until you are in a situation where you really need an annuity I'd avoid them in favor of investments with lower costs. When you do need one, I'd suggest learning about variable annuities, as they are easier to grasp than indexed ones, for the most part.

Best wishes.
NO! This is a horrible deal for everyone except the insurance company.
No one should -- annuities are the worst investment you can make. A young person should purchase shares in medium-risk mutual funds instead; over 20-30 years they will earn far more than any annuity possibly could.

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