3 Tips on Comparing Equity Indexed Annuity Options

When looking at an equity indexed annuity, there are several different things that you will need to evaluate. Before deciding on a particular annuity, you need to research it thoroughly. Here are a few tips on comparing equity indexed annuity options.

1. Identify the Index

One of the first thing that you should do is identify which index the annuity is tied to. With this type of annuity, the performance will be tied to a financial index such as the S&P 500 or Dow Jones Industrial Index. Make sure that you know which index it is following.

2. Cap

You should also determine if there is a cap to what you can earn with your annuity. Many of these types of annuities have interest rate caps that cannot be exceeded. For example, if the S&P 500 earnings 10 percent in a year, you might only be able to earn 8 percent. Make sure that the investment cap is not too low for your personal preferences.

3. Guarantee

Many equity indexed annuity options will also have a minimum rate guarantee available. This means that regardless of how poorly the index performs, the insurance company is going to provide you with a certain rate of interest. The higher the guarantee on the annuity, the more attractive it should be to you as an investor.

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