Is an indexed annuity a good safe investment?

Answer 1

Hello --

I will disagree with the previous poster.

An equity indexed annuity is more like a FIXED annuity, not a variable. The reason of this is because the person selling equity index annuities do not have to be registered with the NASD to sell variable product. a variable product is like mutual funds, variable annuities, variable univeral life policies.

A equity indexed annuity has a guaranteed minimum rate and typically has annual cap limits (usually around 8-10%). Also they usually do not enjoy the benefis of dividends paid out like a real indexed mutual fund.

I do not like these vehicles because the person selling it usually leaves out vital information. Such as:

1. "The stock market has historically performed an average of about 9-10% There is a cap of 10% so you'll do just fine!" -- This is true, however if you look at history of the US stock market, it has landed in the range of 8-11% only a handful of times. Many times the indexes have huge swings up and down.... but average about 9-10%. The large swings up will affect your rate of return.

2. "This will behave just like an indexed mutual fund" -- wrong. Again, more likely than not, the "funds" will not pay dividends which will HUGELY affect your overall rate of return.

I also disagree with one other point that the previous poster made. Variable annuities can be a good investment vehicle, but it really depends on your personal situations. I usually recommend them to people who want tax deferral and many funds to choose from for a large lump sum of money (such as an inheritance, life insurance death claim, law settlement, home sale....etc).

I wold recommend speaking to a good financial advisor in your area. And try to find one you like. The key is to be educated. not sold.

Answer 2

Depends on who you go through to get it. Financial Planner, high fees. Most Equity Index Annuities are great if you are younger, and have the time to wait out the S & P. The ones we offer at my company have no cap, and come with a base, so even if the S & P does not perform as it statistcially does, you lose nothing. That is the difference from the Variable which is 100% at risk in the market. The Fixed gives you a steady safe no risk interest rate. Go directly through a reputable insurance company, not a broker. I do disagree and agree with the last advice. Some Insurance Agents may mislead people with leaving out very important information, but those are the ones who end up in the Insurance Commissioners Office getting their licensed pulled. Not all of us "leave stuff out" just to make a buck.

Answer 3

An indexed annuity is basically a variable deferred annuity. Variable deferred annuities typically have extraordinary fees!
You should usually consider maxing out your 401(k) plan company match and IRAs (both of which allow index fund investing) before adding new money to an annuity.

Answer 4

Basically what it means is that your wealth will fluctuate according to the stock market. It depends where you think the stock market is at the moment. The theory is that over the long haul it will averages up and smooth over the temporary clyclical highs and lows. If you can wait the long haul and dont have to take out the money its okay.

However if you think that the stock mkt is at the peak then basically what it means is that your wealth will averages down for the moment assuming that there will be a multi-year correction and excess of the stock market.

If example over 15 - 20years the index link can average 5%, you will then have to ask yourself is that a good figure comapared to alternative investments.

All this is assuming that that particular group of fund managers is competent and has the skill and lots of "luck" to beat the odds.

Answer 5

An annuity is as risk-free as a results of fact the employer that issued it. yet i desire to show out that a variable annuity is very almost on no account the main dazzling decision. they have extreme expenses which you will no longer be waiting to understand. They teach you projected returns that are no longer assured. those expenses decrease the quantity of month-to-month fee you will get, yet you will have an extremely no longer undemanding time determining how. those products are designed to be perplexing so which you think of they are greater helpful than they are actual. A single-top classification instantaneous Annuity (SPIA) is the only form of annuity i could ever evaluate. You supply up a pile of money, they assure a month-to-month fee. undemanding to evaluate for the time of distinctive agencies. they many times have some recommendations yet you may evaluate for the time of agencies. in case you desire beneficiaries to have some funds, then do no longer positioned all your funds into the SPIA, and bypass away them that funds on your will. A theory that has served me nicely is to on no account purchase a financial product i do no longer understand. And once I examine the contract for a variable annuity, I knew i did no longer comprehend it and that i additionally knew it replaced into designed so as that i could no longer comprehend it even although each and everything replaced into spelled out to fulfill criminal standards.

Answer 6

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Answer 7

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