Wednesday, April 27, 2005
Equity Index Annuity Review
Okay, let us take a look at the article I posted on 4/25 on equity indexed annuities. I thought it was particularly good and what I would like to do is to take pieces of it and add some insight to it. Full credit is given to the source on the post and the link to the actual article is there also.
So here we go. The actual article is in black and my comments will be in red:
Why a Brochure on Equity-Indexed Annuities?
Sales of equity-indexed annuities (EIAs) have grown considerably in recent years. [Word has it that these vehicles may account for over 50% of all annuity sales in 2005] Although one insurance company includes the word "simple" in the name of their product, EIAs are anything but easy to understand. One of the most confusing features of an EIA is the method used to calculate the gain in the index to which the annuity is linked. To make matters worse, there is not one, but several different indexing methods. Because of the variety and complexity of the methods used to credit interest, investors will find it difficult to compare one EIA to another. [Yes, leave it up to insurance companies to keep things simple---yeah right. Most insurance products are complex and this is no exception. There are many indexing methods and other 'moving parts' and this does create a lot of confusion when comparing these vehicles. Furthermore, there are many ways for the insurance companies to limit your gains so it is important to know what indexing method is used and what its advatages and disadvantages are. And for my true 2 cents here...Whoever called them 'EQUITY' index annuities wasn't thinking. That is the most misleading name in the world. When you truly know how these work, you will understand why I say this.]
Before you buy an EIA, you should understand the various features of this investment and be prepared to ask your insurance agent, broker, financial planner, or other financial professional lots of questions about whether an EIA is right for you. [Okay, let me be the first to shock you...Many professionals have no idea how the equity index annuity really works. That is not to take away from those who do. However, these are vehicles with many different features. On the surface, they all look good, but until you read the fine print, you may never know. This is where most people get caught. Even professionals in the industry get confused with these vehicles. How do I know? There are so many seminars for agents about how they really work and how to explain them and they are always packed. Furthermore, it is good to do your own homework. And it is even better not to take it for granted that your professional knows how they work. Do some research and examine whether or not your annuity agent knows how the equity annuity really works.]
Ignorance Is Not Bliss>>>>More to Come Each Day!!!
So here we go. The actual article is in black and my comments will be in red:
Why a Brochure on Equity-Indexed Annuities?
Sales of equity-indexed annuities (EIAs) have grown considerably in recent years. [Word has it that these vehicles may account for over 50% of all annuity sales in 2005] Although one insurance company includes the word "simple" in the name of their product, EIAs are anything but easy to understand. One of the most confusing features of an EIA is the method used to calculate the gain in the index to which the annuity is linked. To make matters worse, there is not one, but several different indexing methods. Because of the variety and complexity of the methods used to credit interest, investors will find it difficult to compare one EIA to another. [Yes, leave it up to insurance companies to keep things simple---yeah right. Most insurance products are complex and this is no exception. There are many indexing methods and other 'moving parts' and this does create a lot of confusion when comparing these vehicles. Furthermore, there are many ways for the insurance companies to limit your gains so it is important to know what indexing method is used and what its advatages and disadvantages are. And for my true 2 cents here...Whoever called them 'EQUITY' index annuities wasn't thinking. That is the most misleading name in the world. When you truly know how these work, you will understand why I say this.]
Before you buy an EIA, you should understand the various features of this investment and be prepared to ask your insurance agent, broker, financial planner, or other financial professional lots of questions about whether an EIA is right for you. [Okay, let me be the first to shock you...Many professionals have no idea how the equity index annuity really works. That is not to take away from those who do. However, these are vehicles with many different features. On the surface, they all look good, but until you read the fine print, you may never know. This is where most people get caught. Even professionals in the industry get confused with these vehicles. How do I know? There are so many seminars for agents about how they really work and how to explain them and they are always packed. Furthermore, it is good to do your own homework. And it is even better not to take it for granted that your professional knows how they work. Do some research and examine whether or not your annuity agent knows how the equity annuity really works.]
Ignorance Is Not Bliss>>>>More to Come Each Day!!!
