Indexed Annuity Investments
Growth and principal protection with an indexed annuity.
An indexed annuity (also known as an equity indexed annuity) is a type of fixed annuity that allows an investor to participate in the upsides of the stock market without actually risking any of their principal due to unexpected market changes. An indexed annuity also guarantees a minimum interest rate for growth and accumulation, with each insurance company using a different formula to calculate the minimums they are prepared to offer.
The indexed annuity was created approximately ten years ago by insurance companies, and was designed to meet the interests of active seniors wanting more from their fixed interest products. While the stock market offers opportunities for higher returns, that upside always comes with a potential risk. On the flipside, fixed interest products prioritize safety and protection of principal, but that comes with the promise of lower returns. The indexed annuity was designed to provide a middle ground where performance meets safety and investors can experience the best of both worlds.
The indexed annuity typically tracks a particular stock market index (such as the S&P 500, NASDAQ, or Dow), with the rate of return linked to a percentage of the increase the index shows over a set period (or a guaranteed minimum interest rate - whichever is higher). That makes the indexed annuity a very attractive product for many investors because the principal investment is always protected and guaranteed from loss, while gains are locked in periodically to add to the total return.
Indexed annuity companies calculate their rate guarantees by formulating different components of products they offer. This can include the minimum amount you are guaranteed to earn, the maximize amount you can earn, the total percentage of upward movement you can participate in, and what you can do with your accumulated funds once the annuity terms is over. For any indexed annuity, it is important to clearly understand how the annuity works, and how it relates to your future financial needs.
Ask for Helpful Planning Assistance with Indexed Annuity Products
Members of the Annuities Institute have a great deal of experience in evaluating indexed annuity products, and can help you get the most from your investment decisions. We work hard to provide unbiased and objective evaluations of all your options, utilizing our independence to maximize your access to all annuities without restrictive affiliations. Contact us today to request a friendly and insightful telephone interview to help determine what investment direction could be best for you.
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