How To Choose The Best Equity Indexed Annuities
In order to understand how this works, it might be helpful to start by learning how a simple annuity works and then find out how such an inv...
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In order to understand how this works, it might be helpful to start by learning how a simple annuity works and then find out how such an investment account is pegged to an index. Once the basics are clear, it's not so hard to learn how to choose the best equity indexed annuities. Buyers just need to run things off on a checklist of factors such as the index, participation rate and a guarantee of a minimum rate of return.
At its core, the annuity is a contract of sorts between the buyer and an insurer. The annuitant must pay the insurer a sum of money either in regular premiums or as a lump sum. The insurer likewise agrees to guarantee an income stream for the annuitant, with said payments starting immediately or deferred until after a date specified in the contract.
This arrangement often serves as a retirement investment vehicle. The annuitant pays in premiums while still in the workforce, and then starts getting payments after retirement. Apart from the number of premiums (lump sum or installments) and the annuity payments start date (immediate or deferred), there are many other variations.
It could be an individual or group contract, and the interest rate offered during the accumulation period may be fixed or variable. The fixed type offers returns at an interest rate specified in the contract. The exact dollar amount of the premiums that the annuitant must pay in is also specified. Variable contracts offer returns that will vary based on the performance of the underlying investments into which the premiums are invested.
The interest earned by investment accounts such as annuities can also be pegged to an index. The exact choice varies based on the financial product in question, but it could theoretically be anything from a commodity index to one for stocks. As far as an annuity is concerned, the best option would be an equity index such as the Russell 2000 or the S&P 500.
An EIA buyer should be looking at a few specific factors to choose the right annuity. The index to which the growth is linked is obviously of paramount importance. But the method the insurer uses to track the chosen index is just as important.
If the insurer uses a point to point method, the rate is adjusted only at key points such as the start date and maturity date. This means that if the index goes up and comes back down in the interim, these changes won't add any value to the EIA. This is why it's critical to find a provider and product which adjusts rates by tracking the index very closely and on a regular basis.
Yet another key issue to be considered is whether the insurer is guaranteeing a minimum rate of return. If so, then the account will earn interest at this minimum level even if the returns based on indexed tracking fall below it. Similarly, there may be a maximum cap which limits the interest earned even if the indexed returns are higher. A standard example of this would be a contract where the interest rate is guaranteed to stay in between 3% to 8%.
You can visit www.russellward.info for more helpful information about Finding The Best Equity Indexed Annuities.
At its core, the annuity is a contract of sorts between the buyer and an insurer. The annuitant must pay the insurer a sum of money either in regular premiums or as a lump sum. The insurer likewise agrees to guarantee an income stream for the annuitant, with said payments starting immediately or deferred until after a date specified in the contract.
This arrangement often serves as a retirement investment vehicle. The annuitant pays in premiums while still in the workforce, and then starts getting payments after retirement. Apart from the number of premiums (lump sum or installments) and the annuity payments start date (immediate or deferred), there are many other variations.
It could be an individual or group contract, and the interest rate offered during the accumulation period may be fixed or variable. The fixed type offers returns at an interest rate specified in the contract. The exact dollar amount of the premiums that the annuitant must pay in is also specified. Variable contracts offer returns that will vary based on the performance of the underlying investments into which the premiums are invested.
The interest earned by investment accounts such as annuities can also be pegged to an index. The exact choice varies based on the financial product in question, but it could theoretically be anything from a commodity index to one for stocks. As far as an annuity is concerned, the best option would be an equity index such as the Russell 2000 or the S&P 500.
An EIA buyer should be looking at a few specific factors to choose the right annuity. The index to which the growth is linked is obviously of paramount importance. But the method the insurer uses to track the chosen index is just as important.
If the insurer uses a point to point method, the rate is adjusted only at key points such as the start date and maturity date. This means that if the index goes up and comes back down in the interim, these changes won't add any value to the EIA. This is why it's critical to find a provider and product which adjusts rates by tracking the index very closely and on a regular basis.
Yet another key issue to be considered is whether the insurer is guaranteeing a minimum rate of return. If so, then the account will earn interest at this minimum level even if the returns based on indexed tracking fall below it. Similarly, there may be a maximum cap which limits the interest earned even if the indexed returns are higher. A standard example of this would be a contract where the interest rate is guaranteed to stay in between 3% to 8%.
You can visit www.russellward.info for more helpful information about Finding The Best Equity Indexed Annuities.
