Tuesday, May 24, 2011
Indexed annuities are insurance products with a minimum rate of return guaranteed to the investor by the insurance company. If the index--usually the S&P 500--has a great year, the investor gets a higher return than the promised minimum rate. But, he doesn't get the full upside on the S&P 500. And, there may be a maximum that the contract can go up in one year, period. These investment/insurance products usually impose a surrender period during which the contract owner would lose a % if he/she took a withdrawal. So they are only suitable for people with no need of liquidity on the money they plan to put into the contract.