Equity Indexed Annuities – Now Called a Fixed Index Annuity
Categories: Annuity Education, Indexed Annuities
Equity Indexed Annuities were first introduced in 1995 as an innovative new product design that allowed individuals to earn interest based on the performance of a stock market index, most commonly the S&P 500, without any of the downside risk. Starting in 2006, the industry began renaming the product, removing the word equity, to help avoid any perception that a direct investment in the stock market was present with these products. They are now called Fixed Indexed Annuities, or sometimes just Index Annuities. For the purposes of this article, Equity Indexed Annuity, Fixed Indexed Annuities and Index Annuities are interchangeable terms.
Watch this short video for a good Indexed Annuity overview and description of how using these products to avoid market volatility can have a significantly positive impact on your savings:
As already stated, Equity Indexed Annuities (aka Fixed Indexed Annuity) offer the potential for higher interest earnings than traditional fixed annuities can provide, without exposing principal to market risk. In exchange for this guarantee of no downside risk, Equity Index Annuity policyholders must generally be willing to give up some of their upside potential, as compared to a direct investment in the stock market.
This is what makes these annuity products so attractive to retired persons and to those approaching retirement who can’t afford, and don’t have time to recover from, a major blow to the value of their investment portfolios. In exchange for having their retirement assets fully protected from loss, an Equity Indexed Annuity owner receives interest credits based on a share of the market index gains without realizing 100% of those gains. For most individual investors who have recently been stung by market volatility, this constitutes a prudent and desirable trade-off.
For a more in depth discussion of Equity Indexed Annuities, their features and benefits, as well as a description of various interest crediting methodologies, please visit our Fixed Indexed Annuities page.
If you would like to research and compare actual equity indexed annuity product offerings from a number of top rated insurance companies, please visit our Fixed Indexed Annuity Rates page.
We realize that due to the vast number of options available, attempting to research and compare Equity Indexed Annuities on you own can become confusing. If you’d prefer your own no-hassle, no-pressure guide, our Annuity Specialists are here to help, just give us a call. Rest assured, there are never any fees or charges for our services.