Product Info

Equity-Indexed Annuities

 

Some experts say the rise in EIA sales corresponds to the rise in the stock market.  As stock prices improve, investors may want to participate in wealth-creation opportunities.  EIAs may be just the type of risk-managed financial vehicle that many people can use to round out their retirement plans. 1

 

Best of Both Worlds

EIAs are fixed annuity contracts(insurance products) that offer returns tied to a market index, such as the S&P 500.  They offer the potential for index-type returns but feature a minimum return rate guarantee like traditional fixed annuities. 2

 

Typically, EIAs include a principal protection provision, which means that once a premium payment has been made or interest has been credited to the account, the value of the account cannot decrease below that amount.

 

In the event that the index to which the annuity is tied under performs or experiences a loss, the worst it can do is earn the contract’s minimum guaranteed rate of return.  Finally, EIAs also offer the potential for tax-deferred accumulation.

 

Complicated Calculation

EIAs are not appropriate for every investor.  Participation rates are set and limited by the insurance company.  So an 80 percent participation rate limit means that only 80 percent of the gain experienced by the index for that year would be credited to the contract holder.  Also, like most annuity contracts, EIAs have certain rules, restrictions, and expenses.

 

An EIA can be an important vehicle to consider for those who like the outlook for the financial markets, yet want to manage their risk.  Please call if you would like to determine whether EIAs are appropriate for your current financial situation.

 

1.         Most annuities have surrender charges that are assessed during the early years of the contract if the contract owner surrenders the annuity.  In addition, if you surrender the contract before 59 1/2, you may be subject to a 10 percent federal income tax penalty.

2.         The guarantees of fixed annuity contracts are contracts are contingent on the claims-paying ability of the issuing insurance company.