Equity Indexed Annuity

When an annuity’s capital appreciation potential is tied to the performance of an index, it is referred to as an equity indexed annuity (EIA). Equity annuities are also commonly referred to as fixed index annuities (FIA) or simply indexed annuities (IA). Generally, the annuity’s losses are limited while a portion of its gains are tied to the individual equity index’s returns. Some common indexes include the S&P, DIJA and the NASDAQ. With an equity indexed annuity: 1) the money can go in as a single premium payment or a series of payments; 2) the money is invested at a variable rate although there is a guaranteed minimum rate of return that provides a floor, and; 3) payments begin at a future date and are at a fixed rate that is based on market performance and is supported by the guaranteed minimum rate.

Lack of Dividends Make Equity Indexed Annuities a Tough Sell

Dividends contributed five percent of the 7.9 percent total return from stocks over the 200 year period from 1802 through 2002.

Dividend paying stocks in the S&P 500 produced an average return of 8.92 percent since 1972.  Over that same roughly 40 year period, non-dividend paying stocks in the same index returned 1.83 percent.

Most equity indexed annuities only count market price gains in their reference index when crediting...

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The Debate on Equity Indexed Annuity Returns Continues

Two recent articles continue the often contentious debate on equity...

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Full List of Annuity Types

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Annuity Digest Buying Guide: Comprehensive List of Annuity Types

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Lincoln Benefit Life

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