Understanding Equity Indexed Annuities
In the past, the road to accumulating assets for retirement led almost exclusively to banks for all but the most sophisticated investors. Today, the options seem endless. With all the financial products available to you, it would be easy to think there’s nothing new under the sun – but you’d be wrong.
Today, one of the fastest-growing financial products in the annuity. Americans own more than $1 trillion in annuities.¹ Simply put, an annuity is issued by an insurance company, and it can offer benefits that you won’t find in other investments. There are two distinct types of annuities.
1. Fixed Annuities – As the name suggests, your money earns fixed rates of interest return. When you decide to take the money out, you can elect to receive a guaranteed fixed payout every month. The relative newcomer in this category – the product we like to call “the better mousetrap” – is the Equity Indexed Annuity, EIA. It pays a minimum fixed rate of return, and you might also earn interest based on a generally used stock market barometer such as the S&P 500® Index, while eliminating market risk to your principal.