• WHAT ARE SOME OF THE EQUITY-INDEXED CONTRACT FEATURES?

  Two features that have the greatest effect on the amount of additional interest that may be credited to an equity-indexed annuity are the indexing method and the participation rate.  It is important to understand the features and how they work together.  The following describes some other equity-indexed annuity features that affect the index-linked formula.

  Indexing Method

  The indexing method means the approach used to measure the amount of change, if any, in the index.  Some of the most common indexing methods, which are explained more fully later on, include annual reset (ratcheting), high-water mark and  monthly averaging, monthly point-to-point and annual point to point.

  Term

  The index term is the period over which index-linked interest is calculated; the interest is credited to your annuity at the end of a term.  Terms are generally from one to ten years, with six or seven years being most common.  Some annuities offer single terms while others offer multiple, consecutive terms.  If your annuity has multiple terms, there will usually be a window at the end of each term, typically 30 days,  during which you may withdraw your money without penalty.  For installment premium annuities, the payment of each premium may begin a new term for that premium.

  Go here to view a chart of Minimum Guaranteed Returns.

  Regards,

  Jeff McLeod
  HappyRetiree.com 
  1-800-286-1812 

  December 15th, 2004 at 8:35 am

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