Understanding Annuities: Why Choose an Indexed Annuity?
An indexed annuity provides the opportunity to benefit from potential gains in the
equity markets, while paying a stated minimum interest rate during market
downturns. An indexed annuity is a compromise between a fixed interest annuity
and a variable annuity. The return on an indexed annuity varies more than a fixed
interest annuity, but not as much as a variable annuity. As a result, an indexed
annuity has more risk and more potential return than a fixed interest annuity, but
less risk and less potential return than a variable annuity.
An indexed annuity may be right for you if you want to participate in the potential
gains from the equity markets, while limiting your potential losses during market
downturns. As a result, indexed annuities may be best suited for individuals who:
Are adverse to risk
Understand that a rate of return linked to stock market performance provides
the potential for higher returns than fixed interest investments, together with
the risk of losing money if the issuing company does not guarantee 100% of
the principle and no index-linked interest is credited, or if the indexed annuity
is surrendered while a surrender charge is in effect
Prefer to delegate investment decisions to others
Want less market risk than with a variable annuity