After taking a terrible beating in the stock market since
2000, in some respects, reminiscent of the 1930s, savvy seniors are
pouring tens of billions of dollars into Equity Indexed Annuities
(EIA). More and More Savvy Seniors are find out it is very good and
very true – and not one of those rare 'too good to be true plans. Some
Index annuities as good as they sound – Very Good Indeed.
As an Elder Law attorney and Asset Preservation Advisor I am
constantly seeking 'Safe Harbors' for my senior clients life savings
they can earn attractive growth and most importantly easily convert to
income. EIAs are an excellent safe harbor program that in most cases
can do both for seniors.
Potential - No Downside Risk
Unlike variable annuities, mutual funds, stocks are other
high risk investments, most EIAs are fixed guaranteed annuities. Being
an annuity means that the contract provides tax deferred growth and
lifetime income options guaranteeing never to outlive your money. But
EIA's strength - and big attraction to seniors- is that the contract
guarantees that the policyholder will receive the upside potential of
the stock market with no downside risk.
in the Stock Market - But Benefiting From Tracking a Stock Market Index
The concept of the plan is simple. While being a fixed
guaranteed annuity and not actually investing in the stock market, the
contract allows policyholders to benefit from the growth of one or more
of several well known and accepted stock market indices such as the S
& P 500, Dow Jones Industrial (DJIA), Nasdaq 100, Russell 2000. If
the selected index rises - the policyholder participates in the gain.
If the index shows a negative return, there is simply no gain but more
importantly no loss of principal. In other words, when the market goes
up, you go up. When it goes down, you don't lose a penny. That's a
solid Safe Harbor!
All the Facts
While EIAs are outstanding plans they are not for everybody.
They are long term guaranteed contracts. Further there are two hundred
insurance companies writing thousands of different variations of EIAs.
Interest crediting methods which underlay the contract guarantees vary
a lot – as to caps and some are more complicated The less complicated
I’ve found usually is more comforting for most Seniors.. I make sure my
clients are fully educated and know all the details of the plan before
they decide on a contract.. EIAs are designed for policyholders to put
funds aside for 5 -7 - 10 years or more as selected. Like CDs there is
a penalty for early withdrawal but generally policyholders can access
up to 10% of the policy a year without any penalty…a very good
accessibility and liquidity feature. Some contracts have 'caps' that
limit somewhat the upside growth. Some caps are 7% a year. Some 12%.
Some 30 %. Some have no caps. They help the insurance company assure
its guarantees to you. There are normally no upfront sales charges or
annual management fees - so 100% of your money is working for you from
the first day as long as you don’t surrender the contract too early.
Most companies initially only guarantee 90 % of the deposit in case of
early surrender. If you keep your funds in for the full term – which is
what this contract is intended for - your guarantee would equal at
least if not more than your original 100% deposit in the worst case
scenario if the market crashed or if the index never went above its
Are Very Safe - and An Excellent Safe Harbor
Many seniors ask me if fixed Equity Indexed Annuities are
safe. Absolutely. Here are some things you need to know. For each
dollar you put into the annuity, about $1.00 of the insurance company's
Capital & Surplus is put into Reserve. Banks, for example usually
only put 3 to 10 cents per dollar received in reserve. Because of this,
insurers are able to insure 100% of your principal against loss while
you are participating in the gains of the selected stock market index.
To learn more about Equity Index Annuities and to see if
they are for you, contact me for a no obligation telephone or personal
assessment at 1-800- 231-6890 or 540-743-6077 or email@example.com. EIAs are a very good
product if used and understood and the contract issued properly. Every
EIA contract should be reviewed by an elder law attorney for proper
asset preservation with legal strategies to work properly.
Stephen J. Kaufmann, JD, MBA, CLU, ChFC, CPCU, FLMI, CEPP
Elder Law Attorney, Chartered Financial Consultant - Asset Preservation
Advisor Steve has over 30 years experience in helping Seniors, Families
and Businesses grow and protect their assets. He is the former Virginia
Deputy Commissioner of Insurance.
He has authored several books and videos. Satellite offices throughout
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