The Index Annuity

With the latest market turmoil and doubt, equity indexed annuities can be an excellent option for somebody nervous to have their retirement savings being exposed to the unpredictability of the stock market. Equity indexed annuities were launched in 1995 and became increasingly popular ever since. Index annuities are underwritten by insurance companies that provide a minimum guaranteed return with excess interest crediting based on the performance of an outside index, such as the S&P 500, Russell 2000, etc.

So how do you know if you are ideal for this type of product? That depends upon a number of factors - above all, the investor time frame and purpose of the investment. If you are a brief term investor seeking maximum yield, then an equity indexed annuity is not for you. Annuities are intended for long term retirement savings. If you are trying to find double digit returns on your investment, you are not going to locate them within an index annuity. If you feel you need to fix your portfolio on a daily basis, an equity indexed annuity mightn't be for you.

So who can be suitable for this kind of investment? Long term savers who've a low tolerance to risk with regards to lack of principle and are much more comfortable with a steady paced ROI are excellent candidates for an index annuity. If you are seeking possible higher rate of yield When compared to a savings account or CD and protection of principle, an equity indexed annuity might provide that. Equity indexed annuities also provide the benefit of tax deferral of the profits which make it an excellent retirement savings vehicle. Bear in mind, an annuity might only be one piece of your overall retirement plan portfolio.

Irrespective of market performance, an equity indexed annuity guarantees the absolute minimum rate of yield - usually 3% acknowledged to some part of the account value throughout the contract's term. Equity indexed annuities credit the return under certain circumstances based on the change in the level of a stock price index such as the S&P 500 or other indices. Unlike an index mutual fund, dividends and capital gains aren't included in the annuity interest calculation. Participation Rate explains the extent to which the agreement holder shares within an index increase. The involvement rate is increased by the index variation to arrive at the rate of interest to be attributed to the policy. A 50% contribution rate means the agreement holder shares in, or participates in half the index change for the period. Please visit