EIA Annuities Offer Safety

Fixed annuities come in two basic "wrappers," traditional and equity-indexed.

Calculate My FREE Annuity Quote Now!

  • Optional: For a 2-person annuity (joint lives)

No agent will call you

Your privacy is guaranteed.
Find advanced calculator options here.

Get quick answers to your annuity questions: Call 800-872-6684 (9-5 EST)

The two phases of an annuity are accumulation and payout. During the accumulation phase, traditional deferred fixed annuities guarantee safety of principal, pay a fixed rate of interest for a period of time, avoid probate should you die, and defer taxation on the earnings until withdrawn. In exchange, the annuity owner agrees to an early-surrender penalty if the principal is invaded above a certain amount, usually 10 percent, during the contracted period. This means an amount of liquidity is inherent in the contract. Some even offer checkbook access. Annuity withdrawals are subject to income taxes on earnings and before age 59, a 1-percent IRS penalty may apply. Guarantees are based on the insurance company's ability to pay claims.

Unfortunately, the interest rate tends to be low, particularly recently. It's difficult to be content with 3 percent returns when your neighbor gained 35 percent in the stock market last year. Your neighbor also likely had greater losses in the years just prior. Therein lies the rub.

Can the desire for principal protection be reconciled to the desire for stock market returns? In other words, can fear and greed find satisfaction at the same time?

Equity-indexed annuities were designed to offer the best of both worlds: a market-driven investment with the potential of attractive upside returns, with no downside risk.

Of course there is no free lunch. Equity-indexed annuities come in many different forms, but all will cap upside potential. It's the trade-off for the guarantee of no risk to your principal (providing you adhere to the contract terms). Can you live with a 12 percent return when the market returns 35 percent? The reason is because your money is not directly invested in the market. Your returns are tied to a market index such as the S&P 500. At pre-determined times during the annuity contract, a percentage of index gains are credited. If the market tanks, there is no gain, but also there's no loss to you.

Testimonial Image
I was hesitant at first to buy an annuity on the internet. Once I got your quote report and read your reviews I was happy I found your website. Your phone reps were always very helpful. You made the whole thing go really simple. Thank you guys!
Joe Murphy
Read 650+ verified reviews

Most EIA contracts also guarantee a minimum rate of interest regardless of market losses. It's typically 1 percent to 3 percent per annum and is payable when the contract matures.

Returns will vary based on the index performance the contract is tied to, and minimum-holding periods may apply. Failure to meet these holding periods can result in fees or charges. Tax-deferred annuities are primarily intended to be long-term investments. Carefully consider all aspects before entering a contract. Advice from a tax professional is recommended.

We'd love to hear from you!

Please post your comment or question. It's completely safe – we never publish your email address.

Add a new comment: (Allowed tags: <b><i>)

Comments (0)

There are no comments yet. Do you have any questions?