An Annuity , which is issued by an insurance company is one of the fastest-growing insuarnce product. Americans own more than $1 trillion in annuities, and that figure is growing daily. There are two types of annuities.

1. Fixed Annuities - As the name suggests, your money earns fixed rates of interest return. When you decide to take the money out, you can elect to receive a guaranteed fixed payout every month. The relative newcomer in this category - the product we like to call "the better mousetrap" - is the Equity Indexed Annuity, or EIA. It pays a minimum fixed rate of return, and you might also earn interest based on a generally used stock market barometer such as the S&P 500 Index. While an EIA can limit upside potential returns, it does not subject your principal to market risk.

2. Variable Annuities - With this type of annuity, your money is put in sub-accounts that can be invested in stocks, bonds or cash to pursue a range of investment objectives. The sub-accounts that invest in stocks and bonds are subject to market risk and fluctuation. The value of this type annuity is based on how well these sub-accounts perform. 


Benefits from EIA

Sound. With EIA , you enjoy a guaranteed minimum account value, a guaranteed minimum interest rate, and no stock market risk to your principal.

Tax Deferral- Your gains accumulate tax-deffered , helping lower your current tax bill while you grow assets for the future. Plus, the deffered income is not included when calculating federal income taxes on Social Security, helping some individuals pay less or no tax on their monthly benefits.

Yield/Rate- Depending on the terms of the contract, you will enjoy competitive interst rates and the potential for greater earnings based on the performance of the applicable index, up to the cap specified by the insurance company.

Liquidity- EIAs generally allow you to withdraw up to 10% of your assets penalty free up to 50%. Once you past the period in which surrender charges apply, you have full access to your money. Also, surrender charges are often waived in the event of disability or the need nursing home care. And annuitization can provide lifelong income options.

Esate Benefits- EIAs can provide beneficiaries with an immediate cash payment. EIAs are not usually subject to the administrative costs, fees, delays and publicity of probate, generally bypassing it altogether.


Even More Benefits..

Unlike 401(k)s, Roth IRAs, and other retirement preparation vehicles, there are no limits to the amount you can contribute to an equity indexed annuity except those set by the insurance company. EIA can help bridge the gap between pension and other retirement plan income and Social Security. Finally, as with all financial options, there are different bells and whistles providing an opportunity for individulas to pick and choose what works best for them.