An index annuity is a special type of annuity that provides returns on your investment according to a specified index that is equity based.
Thus, in other terms, it can be stated that, index annuities are made to reflect the workings of a famous or recognized index.
Like other annuities, an index annuity can also be purchased from an insurance company.
The terms and conditions attached to index annuities payment will depend upon the contract that you have with the insurance company.
An index annuity can be described as a fusion between a fixed annuity and a variable annuity.
Most index annuities are purchased through a large single payment that is made up front.
The index annuities come with characteristics of both fixed and variable annuities.
They provide rates that are dependent upon the performance of the market.
But at the same time, they are safeguarded against market losses through a minimum guaranteed payment.
The amount of growth you can look forward to on an index annuity is very encouraging ranging from 10% to 15% in good market times and 1% to 3 % during the bad market phase.
Though index annuities work with the characteristics of a variable annuity, it does not put your entire principal amount at risk.
A person who owns an index annuity can take part in the general market fluctuations by tracking a particular index.
This will help him or her to keep track of the values of the annuity up and down.
The bets part about opting for an index annuity is that you have several choices that you can choose from.
This can also be quite confusing for people who are not sure how to go about selecting one best suited for them.
Most insurance companies offer a minimum guaranteed rate of return on index annuities which makes it worthwhile when the market conditions are poor.
Though the features of index annuities may differ from one to another, defined below are some common features that are applicable to them:
Thus, in other terms, it can be stated that, index annuities are made to reflect the workings of a famous or recognized index.
Like other annuities, an index annuity can also be purchased from an insurance company.
The terms and conditions attached to index annuities payment will depend upon the contract that you have with the insurance company.
An index annuity can be described as a fusion between a fixed annuity and a variable annuity.
Most index annuities are purchased through a large single payment that is made up front.
The index annuities come with characteristics of both fixed and variable annuities.
They provide rates that are dependent upon the performance of the market.
But at the same time, they are safeguarded against market losses through a minimum guaranteed payment.
The amount of growth you can look forward to on an index annuity is very encouraging ranging from 10% to 15% in good market times and 1% to 3 % during the bad market phase.
Though index annuities work with the characteristics of a variable annuity, it does not put your entire principal amount at risk.
A person who owns an index annuity can take part in the general market fluctuations by tracking a particular index.
This will help him or her to keep track of the values of the annuity up and down.
The bets part about opting for an index annuity is that you have several choices that you can choose from.
This can also be quite confusing for people who are not sure how to go about selecting one best suited for them.
Most insurance companies offer a minimum guaranteed rate of return on index annuities which makes it worthwhile when the market conditions are poor.
Though the features of index annuities may differ from one to another, defined below are some common features that are applicable to them:
- You can purchase an index annuity by providing a large sum of money at one go.
If you wish to put in further money later on, it would probably require different contracts to be developed.
- Index annuities allow you to invest in the flexibility of the market.
In the long term, this usually proves to be more profitable for owners rather than bonds or CD's.
- Index annuity comes with a minimum guarantee rate which means that, no matter how badly the market fares, you will still receive the minimum rate of interest and you can look forward to a minimum account growth at 1% to 3 %.
- The risk factors involved in index annuities are very low as the principal amount is always secure.
- It is an ideal retirement insurance product for those looking to take advantage of favorable market conditions, while safeguarding themselves against the bad market years.
- The return expected on the index annuity varies with the performance of the index.
- The interests earned on index annuities are not taxable until you cash them out.
- You can choose from short term, medium term or long term index annuities.
