When an annuity’s capital appreciation potential is tied to the performance of an index, it is referred to as an indexed annuity (IA). Indexed annuities are also commonly referred to as equity indexed annuities (EIA) or fixed indexed annuities (FIA). Generally, the annuity’s losses are limited while a portion of its gains are tied to the individual equity index’s returns. Some common indexes include the S&P, DIJA and the NASDAQ. With an indexed annuity: 1) the money can go in as a single premium payment or a series of payments; 2) the money is invested at a variable rate although there is a guaranteed minimum rate of return that provides a floor, and; 3) payments begin at a future date and are at a fixed rate that is based on market performance and is supported by the guaranteed minimum rate.
This is a follow-up on two previous entries that discuss the...
Submitted by tom on
I received the following question from MJM in Hawaii:
Where did you finally locate the actual study I have looke everywhere and cannot find it Thanks, mjm in Hawaii
I could not find the study anywhere online either. Professor Babbel was kind enough to provide access to it.
I will be publishing some of the specific results early next week.
There is in fact a study from Professor David Babbel that compares the performance of fixed indexed annuities to portfolios of stocks and bonds and it is fascinating.
A recent article in Forbes magazine discusses the pros and cons of equity indexed annuities.
On the negative side the author makes a high level reference to costs and questions whether...
