Join Early Retirement Today
Thread Tools Search this Thread Display Modes
Equity Index Annuities
Old 12-14-2004, 04:38 PM   #1
Dryer sheet wannabe
Join Date: Dec 2004
Posts: 11
Equity Index Annuities

I retired in August and moved to Sun City Grand in Surprise Arizona from Indiana. Free meals abound with folks selling equity index annuities. They sound too good to be true, so of course I am skeptical. What am I missing? :P
at_last is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Re: Equity Index Annuities
Old 12-14-2004, 05:54 PM   #2
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Join Date: Mar 2003
Posts: 18,085
Re: Equity Index Annuities

We had a discussion not that long ago. In a nutshell, these things are very expensive fixed annuities with embedded euity call options. You could relatively easily assemble a package of simple instruments that would give you more upside at a lower cost. No free dinners, though.

If you really want to know how to replicate these things on your own, ask away, but its not something I would think of as all that attractive. They are selling the sizzle, not the steak.
"All animals are equal, but some animals are more equal than others."

- George Orwell

Ezekiel 23:20
brewer12345 is offline   Reply With Quote
Re: Equity Index Annuities
Old 12-16-2004, 11:18 AM   #3
Recycles dryer sheets
Join Date: Nov 2002
Posts: 373
Re: Equity Index Annuities

IIRC, when I read some of the prospectus(s) in depth after an earlier discussion, the catches were:

fee skimmed off the top (always bad).

upside (equity participation part) capped at x% per quarter (or month). x% got you a decent return, but in really good quarters you got screwed. i.e. for a 12% year, with a 4% per quarter cap, if the 12% was 3% each quarter, you were fine. But in reality, most gains are concentrated in a short period of time, so if the 12% was 10%, -1%, 2% 1% for the 4 quarters, you got 4%, -1%, 2%, 1%. or 6%. Yuck!

The catches could change, but just a couple of things to look for in the fine print. I'm sure there were more.....
wzd is offline   Reply With Quote
Re: Equity Index Annuities
Old 12-16-2004, 04:10 PM   #4
Full time employment: Posting here.
Join Date: Oct 2003
Posts: 961
Re: Equity Index Annuities

From Peter Katt's [a fee-only life insurance advisor] articles:

Indexed Annuities: Too High a Price for Market 'Protection'

Not only do you only get the capital apprecation of whatever index, you get to pay ordinary income tax on those gains, instead of lower capital gains tax rates on taxable equity gains.

Read that prospectus. If you still don't understand them, don't put any money there.

- Alec
ats5g is offline   Reply With Quote

Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off

Similar Threads
Thread Thread Starter Forum Replies Last Post
Financial dinners and Equity Indexed Annuities janeeyre FIRE and Money 20 04-02-2007 08:03 AM
Index funds beat most active funds JustCurious FIRE and Money 57 10-23-2006 11:14 AM
Spartan U.S. Equity Index Fund - Fidelity Advantage Class(FUSVX) xmanz3 FIRE and Money 8 07-05-2006 08:19 PM
Equity Indexed Annuities John_Lee FIRE and Money 0 04-07-2005 07:46 AM
S&P 500 Asset Class question Cut-Throat FIRE and Money 1 12-30-2003 08:54 AM

» Quick Links

All times are GMT -6. The time now is 02:58 AM.
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2021, vBulletin Solutions, Inc.