Equity Indexed Annuities Home Care Path

Equity indexed annuities also known as fixed index insurance products, and indexed annuities, have been strongly marketed to Wisconsin consumers. An annuity is a contract between the senior and the insurance company , in which the company promises to make payments to the senior. If the senior must wait to receive payments, it is a defferred annuity. If the payments begin immediately the senior has an immediate annuity.

With a fixed annuity the insurance company pays a set amount to the senior regardless of the performance of the stock. So less risk. With a variable annuity the rate of return is not set but depends on the performance of the stock. So more risk. Equity indexed annuities fall in between these two.

Equity indexed annuities have characteristics of both fixed and varaible annuities. The return on an equity indexed annuity varies more than a fixed annuity, but not as much as a variable annuity. Equity indexed annuities give more risk than the fixed annuity but this include more potential for return. The equity indexed annuity gives you less risk than a variable annuity , but this includes less potential for return.

Equity indexed annuities provide a guaranteed interest rate combined with an interest rate linked to a market index. Market index is a value placed on the performance of a specific group of stocks. The return on market index linked interest is related to several defined features.

If the insurance company lowers the participation rate, or cap rate, of the equity indexed annuity this can contribute to a lower return. If the insurance company increases the spread, asset, margin fees, this can contribute to a lower return. So how the equity indexed annuities index linked interest rate is computed, can be complex.

Equity indexed annuities are considered long term investments. Getting out early can result in a loss. Many plans offer about 90 percent return on premiums you pay in, and about 3 percent interest. Seniors and families are encouraged to consult a financial advisor to best explain equity indexed annuities.

Home Care Path www.homecarepath.com provides non medical in home custodial care for seniors in south central Wisconsin.