What should I do with my annuity in its second year if the cap and spread values have been lowered?
I purchased an annuity last year. It just renewed for the second year and they lowered the cap and the spread values. I didn't even know what they were. I tried to calculate the return for the first year and then for the second year to try and understand how it all works. It appears to me that the annuity company lowered the potential return for the second year. Should I have known what these were before I bought? I reread the annuity document and saw where these exist and that they can be changed every year. Now what do I do? Do the insurance companies use these values to cut our returns and enhance theirs, or do I not understand how annuities work?
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I am sad you are having to deal with this. The annuity representative should have explained this to you and made sure you understood what you were buying. The contract/prospectus for annuities are very long and very complicated, and I can confidently say many annuity sales representatives (calling themselves "financial advisers") don't fully understand their own products.
As for what to do next, you should determine if it would be better to continue the annuity or give up the money you have already put into it and instead invest using a different strategy. For many people, cancelling the annuity and investing instead in an IRA or other retirement account will provide them with a bigger retirement benefit than continuing with the annuity. And if you have access to a workplace plan where your company matches your contributions, maxing out the match by investing at work instead will pretty much always be a better than an annuity.
If you don't know how to do these calculations, Purposeful Finance offers a free annuity analysis which helps you understand the difference in expected retirement benefit between an annuity and investing in an IRA, 401(k), or other retirement account. So long as you can find the needed information in the annuity contract, there is no charge. The information usually isn't difficult to find, and from your question, you are likely very capable of understanding the contract enough to find the information.