Understanding Equity Index Annuities

Equity index annuities are partially responsive to market index performance and contain a no-loss provision. Also categorized as single premium traditional annuities, they adhere to guidelines set by the insurance department, which calls for the necessity of interest guarantees and guarantees to counteract loss of principal while offering standard annuity benefits. The following information expands upon the positive aspects of equity index annuities.

Includes a No-Loss Provision
Protected against the "ups and downs" of the market index, the no-loss provision ensures that the account value will remain at its present value after a premium has been paid or interest accrued.

Includes Interest Guarantees
Maximum and minimum interest rates, known as caps and floors, respectively, ensure that an equity index annuity can gain from high returns but never lose money. Why? While caps are subject to a range of percentages that allow an annuity to experience substantial returns, a floor is normally zero.

Produces Preferable Rates of Return
Retirement planning involves the desire to avoid inflationary problems while fulfilling goals in the years to come. The equity market has been consistently generous in producing competitive rates of return.

Similarities between Equity Index Annuities and Traditional Annuity Benefits
* Tax-deferred growth
* Early withdrawal without penalty (conditional)

Differences between Equity Index Annuities and Traditional Annuity Benefits
* Receive ALL of your money back
* Avoid initial sales costs
* Avoid maintenance costs
* Annuity values dictated by the market

Important Considerations
Insurance companies control the terms of the equity index annuities. These terms include guarantees, cap and participation rates, fees, and rules that may affect overall returns.

This information is presented to educate the reader and does not constitute professional tax and legal advice.

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