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The Pros and Cons of Equity Index Annuity

Annuity for retirement prepares you for the battle ahead when you finally retire from active service.  Several insurance companies in the US offer all forms of retirement annuities for numerous individuals who are planning to enjoy their retirement periods.  The equity index annuity is indeed one of the basic options. You have to know more about it.

In simple terms, equity index annuity displays as a unique combination of variable and a fixed annuities.  The equity annuity is designed to give you the best of the fixed and variable annuities.  It comes with guaranteed return feature that makes it very profitable.  However, the return is very much determined by the performance of the benchmark index. Here are the pros and cons of equity index annuity.

The Pros

As unique form of annuity for retirement, equity index annuity helps you to participate in the upside position when the stock marketing is on the rising side.  You can as well protect yourself against the downside since you’re sure of earning a guaranteed minimum return even when the prices of stocks keep falling.

Equity index annuity also has the propensity of paying higher returns than ordinary standard fixed annuity.  It also has lesser risks that a variable annuity.

The Cons

As unique form of annuity for retirement, equity index annuity can be very complex and technical.  It has a very complicated nature that may require sometime for you to understand.  It also comes in a variety of forms. This further complicates its features.  In most cases, investors find it very difficult to understand the processes involved. Many investors always decide to go for other forms of annuity for retirement, which they can easily comprehend and follow.

Again, equity index annuity doesn’t actually match the entire return of the market index it’s attached to.  The various equity index annuities calculate the gains involved in divers ways.  This further complicates issues.

There are also certain fees involved in equity index annuity. There are surrender charges and other hidden fees.  In most cases, such fees depend on the insurance company you’re dealing with.  Some index annuities charges are up to 20% and they can run for   15 years and above. Thus, you may not have express access to your money without paying the heavy charges for a long period.

How to know if Equity Index annuity if right for you

You can easily discover if equity index annuity is the right annuity for retirement that can pay you.  You can consider going for it if you want to reap market returns without taking on the volatility and the risk of the stock market. Again, you can always discover if the equity annuity is right for you by making proper inquiries.  You need to go through the various offers coming from insurance companies that offer annuity for retirement.  You also need to go through the various terms and conditions involved.  Getting useful pieces of advice from a reliable financial adviser can also be of help. You’ll always gain a lot when you’re properly tutored on the pros and cons of the equity index annuity.