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How To Find The Best Equity Index Annuity For Your Needs

Richard Ericson

Which equity indexed annuity is the best? Which annuity is the best for you? Often individuals become overwhelmed by the amount of choices available when learning about, and selecting the best annuity for their purpose.  I believe those who are over 50 should have a majority of their retirement assets in safe, protected and guaranteed retirement planning vehicles. The key investment piece is the Equity Index Annuity. Equity Index Annuities may be referred to as fixed index, index, or hybrid. Equity index annuities are NOT variable annuities. Learning annuity vocabulary, and more importantly, understanding the key components of an annuity will significantly allow your selection process to be more efficient and effective. To assist clients in this process, I have identified 9 common and key components I regularly evaluate:

  • What do you want?  Annuities have tremendous flexibility and variety. Most Equity Indexed Annuities are built very similarly, yet there are subtle differences that make certain contracts more favorable than others based upon the purpose of the client. These differences don’t make one contract better or worse than another. Ask yourself, what is most important to me, growth, distribution, income doubler, long term care benefits?
  • Strength of company.  Look at ratings, solvency, and history to determine which company is best suited for you.
  • Issue age.  Your age is a very important factor because different contracts are available for different ages.
  • Contract length.  Again, what is the purpose and goal? When do you want to annuitize? Are you comfortable with the surrender schedule listed in the contract?
  • Bonus.  Many contracts offer a bonus for entering into the contract. Is the biggest bonus the best option? What if there is no bonus? How does the bonus work?
  • Income Rider.  An income rider may or may not be attached to the annuity contract. Often times the income rider is referred to as the roll-up or the percentage of growth the insurance company will guarantee each year until the income value is annuitized. There are certain variables with each company’s income rider. Be sure to focus on the sum of the key variables (bonus, roll-up rate, caps, distribution rate, etc)….not on an individual basis [example – a large up-front bonus can be meaningless if on contract with a low distribution rate and a long surrender schedule].
  • Cost.  It is important to differentiate between a variable annuity and an indexed annuity. Typically there are no fees associated with an equity indexed annuity contract itself. Typically, there are several riders that are free to the client. The Income Rider does carry a cost. The expense of this rider may vary, and its cost should be closely evaluated to determine its true value.
  • Caps.  There are many crediting options with each annuity contract. Your intentions again play a part in determining how important this feature is.
  • Distribution Rate.  At what rate will the assets of the annuity be distributed over a lifetime? This becomes a key component of planning for individuals, again based upon specific need as well as their age.

There are choices when selecting the best annuity for your purposes. The evaluation process can seem daunting at first, but it becomes much easier once you understand the terms and see how the core variables interact with each other. If you need help, be sure to seek out an independent retirement planner licensed in your state.

To see my list of top 5 equity indexed annuities, call me at (303) 749-5853 or email to rich@retirepr.com.

To learn more from this annuity professional, click here (Richard Ericson).

About the Author:

Richard Ericson was born and raised in Salt Lake City, played quarterback for Weber State University and coached football at the Division One level for 10 years at Weber State and Utah State Universities as offensive coordinator. He now coaches individuals on how to invest safely in their retirement plans. He has had his own radio program and was featured in Fox Business News emphasizing risk-free investments. Rich’s expertise is working with business owners utilizing advanced tax strategies to reduce risk and build tax-favored and tax-free wealth. Rich received his Bachelor’s Degree in Communications and his Master’s Degree in Education from Weber State University. He is currently licensed to sell Property & Casualty, Life and Health insurance, as well as annuities. With his expertise in analyzing risk, Rich is well qualified to help individuals evaluate their opportunities to reduce tax, legal, and market risk.

Richard strongly believes that money which grows consistently and without risk is the safest investment for his clients’ retirement income. “Playing the ‘Wall Street Game’ with your sacred money is a sure way to run out of money when you need it the most,” warns Rich. He further states, “If you want to play the stock market game with 30-40% of your wealth, that’s fine, as long as you have enough money in safe, guaranteed investments to meet your retirement goals.”

He can be reached at (303) 749-5853 or rich@retirepr.com.

 

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