An EIA (equity index annuity) is NOT a security. It is an insurance product and is
better called a fixed, indexed annuity. Like all fixed annuities, it earns an interest rate
every year. In case of index annuities, the interest rate is determined by the performance of an index, usually an equity index.
The interest rate is determined by how the Index does for a particular 12 month period. However, unlike a Variable Annuity where you can lose money if the market declines, the worst you can do with a fixed, indexed annuity is earn zero for that year. Your balance remains the same as it was at the end of the previous year.
I went to Yahoo Finance and pulled up the last ten years for the S&P 500 Index showing monthly quotes and used June figures. The table below gives you the actual quotes of each year for June. It also shows the index change from year to year and how the index changes affect the interest rate on the annuity. I used a stragegy for the index annuity of annual point to point with a 7% cap for simplicity sake. There are other strategies that we will discuss later in another post.
It is important to understand what a fixed index annuity is and what it is desgined to do before I get into the details of what I am looking for in the best indexed annuity .
I will look at the details of my favorite plan in the next post. Meanwhile, be sure and
take a good look at the table below and understand it.
DATE S&P 500 INDEX EIA INTEREST ANNUITY BALANCE
CHANGE RATE
June 1999 1372.71 $100,000.00
June 2000 1454.60 5.97% 5.97% $105,965.57
June 2001 1224.38 -15.83% 0% $105,965.57
June 2002 989.82 -19.16% 0% $105,965.57
June 2003 974.50 -1.55% 0% $105,965.57
June 2004 1140.84 17.07% 7.00% $113,383.16
June 2005 1191.33 4.43% 4.43% $118,401.14
June 2006 1270.20 6.62% 6.62% $126,239.69
June 2007 1503.62 18.38% 7.0% $135,076.47
June 2008 1280.00 -14.87% 0% $135,076.47
June 2009 912.32 -28.73% 0% $135,076.47