Many looking for security through EIAs.
Many turn to EIAs as a part of their financial plan. With the market advancing and declining so rapidly, many consumers are looking for safety and security without having to sacrifice reasonable interest returns.
Equity index annuities are excellent alternatives for investors seeking safety in a low interest rate environment or a volatile market. Here’s how they work, your return is based on the increase of a stock or equity index, such as the S&P 500. If stocks rise, you benefit from the increase. If stocks fall, you do not lose any money, most contracts guarantee a minimum return, typically 3%. This is what makes these newer products so attractive to retired persons and to those approaching retirement.
What makes EIAs different than a traditional fixed annuity is how interest is credited to the account. Typically, the insurance company will buy an option in a particular index like the DOW, S&P 500 or the NASDAQ. After a period of time, usually one year, the option contract comes due. One of two things will then occur. If the market index has advanced, the option is cashed in and interest is credited to the annuity principal. Conversely, if the market has retreated, the option expires and no interest is credited to the account for that year.
EIAs aren’t regulated by the National Association of Securities Dealers or the Securities and Exchange Commission.
