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| *Ostroff, Fair and Company>>>Insurance |
What are you thoughts on equity indexed annuities? |
They usually dont have any fees (annual or funds) attached to them like VAs do. And they dont have the downside risk since they are not actual funds. Granted they dont have the diversity that a VA with 15 different funds has, but for a basic need for someone who is afraid of the market to begin with, it sound pretty good. Your thoughts? An annuity should only be purchased by a very small segment of the public that aren't weathy enough to be completely financially independent, but weathly enough to have a higher standard of living and are concerned that they are going to outlive their assets. Equity indexed annunities have only one positive selling point. You will never lose all your money in them because they have a floor or minimum return guarantee, even if the benchmark they are indexed to loses money, the insurer will eat the loss and make sure the annity stays level, so there is no net loss. The tradeoff is that there is a fixed ceiling above which you cannot earn more than, so if the market is really hot and you could have made a ton of money on a big upswing.....you are locked into a ceiling and you make that ceiling and the insurer keeps the rest. Which means you are locked out of big gains. Because of this EIAs are not generally a good deal for consumers unless you are willing to give up potentially huge gains in exchange for the comfort of knowing you will never go into the negative, like you would in a stock account, etc. I agree with your assessment. I typically recommend indexed annuities to people saving for retirement who can't stand the fluctuation of the market. There is zero investment risk to these products, but the indexed account allows the client to participate in some of the market upside. For example, if the market rises in a particular year, the return is greater, but if the market falls no money is lost. Upside potential is not as great as in a variable annuity, but there are no fees or loads. Myself Annuities are generally not a good investment. agent, 20+ years Equity-indexed annuities are good investments, especially for those who are risk averse. Many of these accounts have averaged over a 7% annual return the last 5 years. A 7% average with no downside risk is hard to find anywhere. That being said, within any investment group some accounts are better than others. I am aware of equity-indexed annuity accounts with long surrender periods and low caps on the amount you might earn. That is to say... not all annuities are created equal. You also want to understand that eia's have fees, you just don't see them. They come in the form of spreads. The higher the spread and lower the cap - the less you might earn. It is important to shop around some. I have written extensively about eia's, feel free to learn a little more here: http://www.ohioinsureplan.com/annuities/... http://www.ohioinsureplan.com/charts/... All depends on many things, but if youre really young, i'd say no. The prime candidates for these are people 55 and up. If you're young, split it into a va, and mutual funds. VA will give you income guarantees, mutual funds will give you the risk. Im a believer in owning several vehicles. Heck CD's are paying 5%, not too shabby |
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