index annuity | Annuities

Indexed annuity

Not very long ago, investors had two options when it came to annuities. First one was variable annuity and the second one was fixed annuity. Thereafter a third type of annuity product was designed by annuity companies which is known as equity indexed annuity. An indexed annuity is designed to give a return which is close to important indices such as S&P 500 or the Russel 1000 Index. Investors who have parked their funds in index annuities can indirectly participate in the markets. Let us find out some of the other features of Index annuities and also the genre of investors for whom this product will make a good fit. This product is definitely a good fit for investors who have a high risk appetite. Imagine this scenario. An investor who has invested in indexed annuities can expect a rate of return which is 50% to 60% of the underlying index. However, if the indices are not performing well then the investor’s rate of return for the annuity can take a serious hit. The factor known as “participation rate” specifies the level at which the index annuity owners will participate in gains in the index. Consider this example. If the participation [...]

Can An Equity-Index Annuity Guarantee What You Want?

Fixed annuities guarantee your income based on current interest rates. Facing a long retirement horizon, you may want to consider relying a little on the markets to enhance your annuity income. An equity-index annuity offers that chance, but you must understand how it works. Equity-index annuities combine features of traditional insurance products (guaranteed minimum return) and traditional securities (where the return is linked to equity markets). Depending on the mix of features, an equity-index annuity may or may not be a security. In fact, the typical equity-index annuity is not registered with the SEC (but may be in the near future and become classified as a security). Here’s how they work: During the accumulation period – when you make either a lump sum payment or a series of payments – your insurance company credits you with a return based on changes in an equity index. The S&P 500 is a typical index although some equity index annuities may be based on indexes such as EAFE, he NASDAQ 100 or the Wilshire 5000. The insurance company typically guarantees a minimum return of 90% of the premium plus a minimum interest rate. With an equity index annuity, surrender charges can last for [...]