Equity Index Annuity - Is It The Right Choice For Seniors?A couple were approaching retirement and needed to find the best investment for their golden years. They did not want to have to buy and sell stocks in the daily market. They decided the best option for them would be an equity index annuity. They had asked their broker what would be the best choice and he said annuities, but a special one that was tied to S & P 500 by indexing the fluctuation of the market. They understood that an insurance company could sell them the annuity and deferring it to until they were actually ready to retire. The first step was to take variable stocks and their retirement incomes and transferred them for the down payment to the annuity. Over the ensuing fifteen years payments will be made to bring their account up to the amount they had originally set. Most are satisfied with this type of financial funding because at the time of retirement the payout had reached its set goal. People now have the comfort of knowing that because of their investment they will have a steady income beyond their pension. They are no longer vulnerable to stock fluctuations. There are some problems with this type of financial move, especially if you find yourself in the situation where you must make an early withdrawal. According to the Federal Government "even with a guarantee, you can still lose money if your guarantee is based on an amount that's less than the full amount of your purchase payments." There is also likely to be tax penalties. In this time of an unstable economy, it is very hard to make the right kinds of decisions. How many senior citizens have seen their hard earned retirement funds go up in smoke. It is prudent to use caution in any new investment, especially if you are at the age of fifty five or older. Clearly, one should contact a trusted investment lawyer or accountant, and not just take the advice of an unknown insurance salesman who is trying to sell you an equity index annuity. It is crucial that one looks at the total picture, including funeral arrangements, other retirement incomes, etc. Ultimately, the advice may well be go for it, but go with caution. Good Luck! |
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Since the average life expectancy is on the increase because of higher and sophisticated standards of living. Lifetime annuities are mainly for funding retirement. There are two types of lifetime annuities -- fixed and variable.
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With the recent market turmoil and uncertainty, equity indexed annuities may be a good option for someone nervous about having their retirement savings being exposed to the volatility of the stock market. Equity indexed annuities were introduced in 1995 and have become increasingly popular ever since.
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