With Current Market Place Circumstances Are Equity Indexed Annuities A Great Alternative For Retirement Savings?

With the current industry turmoil and uncertainty, equity indexed annuities may be a superb financial advisor option for somebody nervous about getting their retirement savings becoming exposed for the volatility with the stock market. Equity indexed annuities had been introduced in 1995 and have turn out to be increasingly well-known ever considering the fact that. Index annuities are underwritten by insurance providers that give a minimum guaranteed return with excess interest crediting primarily based on the efficiency of an outside index, including the S&P 500, Russell 2000, etc.

So how do you know if you are suitable for such a product? That depends on several factors - most importantly, the investor's time frame and purpose in the investment. If you are a short term investor looking for maximum return, then an equity indexed annuity is not for you. Annuities are meant for long-term retirement savings. If you are looking for double-digit returns on your investment, you are not going to find them in an index annuity. If you feel you need to adjust your portfolio on a regular basis, an equity indexed annuity may well not be for you. So who might be suitable for such an investment? Long term savers who have a low tolerance to risk when it comes to loss of principle and are more comfortable with a steady paced return on investment are great candidates for an index annuity. If you are seeking potential higher rates of return than a savings account or CD and protection of principle, an equity indexed annuity may well give that. Equity indexed annuities also have the advantage of tax deferral of the earnings which make it a great retirement savings vehicle. Keep in mind, an annuity could only be one piece of your overall retirement plan portfolio.

An investor must be aware that equity indexed annuities have fees that will get you in the back-end if you access your money prior to the maturity of your contract. These fees, known as surrender fees, can be extremely expensive in some annuities. The surrender charges usually decline over a period of years, but not always. As stated earlier, equity indexed annuities are for long term investors so it is important to be able to commit your funds for the life of the contract.

There are many different factors when considering this type of investment. Annuities vary from contract to contract and insurance coverage company to insurance company, which can become very confusing very quickly. Each contract has its own unique fees, surrender charges, participation rate, cap, annual reset, among other things. Equity indexed annuities have gotten a bad rap over the past few years. That is mostly because of inexperienced, unknowledgeable or unqualified sale agents marketing to clients who might be unsuitable for the product. It is highly recommended that you speak with a knowledgeable investment advisor who has experience working with equity indexed annuities and the ability to accurately assess your financial suitability before committing your money.