Equity Indexed Annuities
About EIA
Unlike the market, lock in and never
give back
gains at the end of each crediting
period.
TAX DEFERRAL!
The power of triple compounding
Make Money…
on your principal, on your interest
compounded and on the tax dollars you did not send to Uncle Sam!
Qualified and Non-Qualified!
PROBATE AVOIDANCE!
PAYOUT OPTIONS!
NO FEES!
Calculating Return
There are several methods used to
calculate the interest that may be credited to an equity-indexed
annuity. You should
understand these features and how they either work alone or combine
to affect your EIA’s potential return.
Participation Rate
Spread/Margin/Administration Fee
Interest Rate Caps
Participation Rates
The Participation Rate decides how much of the increase in the index
will
be used to calculate the index-linked interest.
For example, if the calculated
change/growth in the index is
9%
and the
participation rate
is
70%, the index-linked
interest rate for your annuity will
be
9%
of 70%, or 6.3% (9%
x 70% =6.3%).
A company will set a different participation rate for newly issued
annuities as often as each day. Therefore, the initial participation
rate in
your
annuity will depend on when
it is issued by the company. The
Company usually guarantees the participation rate for a specific
period
(from one year to the entire term). When that period is over, the
company
sets a new participation rate for the next period. Some annuities
guarantee that the participation rate will never be set lower than a
specified minimum or higher than a specified maximum.
Administration Fees
In some annuities, the index-linked interest rate is computed by
subtracting
a specific percentage from any calculated change in the index. This
percentage
sometimes referred to as the "margin," "spread," or
"administrative fee," might be instead of, or in addition to, a
participation
rate.
For
example, if the calculated change in the index is 10%, your annuity
might
specify that
2.25%
will be subtracted from
the rate to determine the interest rate credited.
In
this example, the rate
would be 7.5% (10% - 2.25% =
7.5)
In
this example, the company
subtracts the percentage only if the change in the
Index produces a positive
interest rate.
Interest Rate Caps
Some annuities may put an upper limit, or
cap, on the index-linked interest rate. This is the
maximum rate of interest the annuity will earn.
In
the example given above, if
the contract has a
7% cap rate, 7%, and not 7.75%, would be
credited.
Not all annuities have a cap rate.
Indexing Methods
index, Some of the most common
indexing methods include:
annuity. The
interest is based on the difference between
the highest value and the
index value at
the start of
the term. Interest is added to your annuity at the end of the term.
value at the
end of the term and the index value at the start of the term.
Interest is added to your
annuity at the
end of the term.
For information regarding No Market Risk
Retirement Planning / Low Market Risk Retirement Planning and
information regarding Life Settlements as it compares to other
investments, call
(972) 463-3833 or fill in the form below: