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Ibbottson: Fixed Indexed Annuities Beat Bonds For Retirees
Since 2006, EIAs [equity indexed annuities] have undergone several changes, including a name change. Insurers began calling these products FIAs (fixed–indexed annuities) instead of EIAs, in order to avoid suggestions (and avert any accusations) that EIA contract owners were investing their money in stocks (also known as equities). Many investment professionals simply called them “index annuities.”
The cost is embedded wtihin the annuity parameters like payout rate, guaranteed minimum return, etc. So there's no explicit cost stated. These are not low cost vehicles, but it's difficult to figure out how much they are costing you.
Also, it seems that most of these annuities are capped. The good news, if you can call it that, is that the caps I'm seeing are straightforward. There can be caps where, if the market does better than the cap, you don't get anything!
Equity indexed annuities are called "fixed" because all annuities are either fixed or variable. Fixed annuities are general promises by the insurer issuing the annuity to pay a fixed amount. Here, the amount to be paid is "fixed" by the return of the index followed. The promise you get is only as good as the insurer.
Variable annuities have no particular return that is promised. Also, rather than relying upon the financial soundness of the issuer (as with an ETN), your money is segregated from the issuer and invested in a mutual fund. So your investment is arguably more secure - it's backed by the underlying assets of the fund, not by the insurer.
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By he way. The Bears "could of" had Tyrod Taylor! You guys lost out.
https://www.mutualfundobserver.com/discuss/discussion/comment/99053/#Comment_99053
From Dummies: The cost is embedded wtihin the annuity parameters like payout rate, guaranteed minimum return, etc. So there's no explicit cost stated. These are not low cost vehicles, but it's difficult to figure out how much they are costing you.
Also, it seems that most of these annuities are capped. The good news, if you can call it that, is that the caps I'm seeing are straightforward. There can be caps where, if the market does better than the cap, you don't get anything!
Equity indexed annuities are called "fixed" because all annuities are either fixed or variable. Fixed annuities are general promises by the insurer issuing the annuity to pay a fixed amount. Here, the amount to be paid is "fixed" by the return of the index followed. The promise you get is only as good as the insurer.
Variable annuities have no particular return that is promised. Also, rather than relying upon the financial soundness of the issuer (as with an ETN), your money is segregated from the issuer and invested in a mutual fund. So your investment is arguably more secure - it's backed by the underlying assets of the fund, not by the insurer.
Regards,
Ted