Indexed Annuities - Safety without Sacrificing Growth

Indexed annuities are fixed annuities that provide the potential to earn higher levels of interest than traditional fixed annuities, cd’s, and other conservative fixed alternatives. 

This is done by earning interest that is linked to the upward movement of an external equity or bond index.  Equity Indexed Annuities only participate in the upward movement of the allocated indexes, never the downward movement.  You are in complete control of how your premiums are allocated by selecting the index or indexes, and the crediting methods on each contract anniversary.  Some of the most commonly used indexes are: 

• S&P 500
• Dow Jones Industrial Average
• NASDAQ 100®
• Russell 2000®
• S&P Midcap 400® 
• Dow Jones EuroStoxx 50®
• Lehman Brothers U.S. Aggregate Bond Index

In Addition to these  indicies, most Indexed Annuities offer a:

 Fixed Account Option

The fixed Rate Account is guaranteed for the entire contract year and renews annually thereafter. A very important benefit is that your principal and any interest earned can never be lost due to market volatility.  Once gains are credited, they are locked in and cannot be reduced.

What Are Some Other Important Features in Equity Indexed Annuities?

The two features that have the greatest impact on the amount of interest credited to an indexed annuity are:

 Indexing Method

This is the method used to determine the amount of movement, if any, in the respective indicies.  Two of the most commonly used methods are the annual reset / averaging and the point-to-point.

Participation Rate

 The Participation Rate determines what percentage of the gain, if any, is credited to the indexed annuity.  For example, if the calculated gain in the index(s) is 10% and the participation rate is 75%, the interest rate credited would be 7.5% (10% x 75% = 7.5%).  Most companies reset the participation rate annually, and it remains set for that contract year.

 Real Benefits of Indexed Annuities