With the recent upheaval in the stock market, more and more people are turning to annuities. An annuity, like any other investment, has its pros and cons, and its effectiveness in your overall portfolio and investment plan depends on your individual needs and goals. One interesting option that might work for some is the equity indexed annuity. Recently, I spoke with Mariana Moskovith, a Financial Services Specialist with SagePoint Financial. Here is some of what she had to say about equity indexed annuities:
“When you get an equity indexed annuity, you are getting an annuity that is tied to the stock market in some way. You can participate. In many cases, you are guaranteed downside protection in as well. Many of these annuities have a principal guarantee now, and you can also include an income rider — essentially creating a pension for yourself,” Moskovith explains.
However, it is important to realize that the returns on an equity indexed annuity won’t actually keep pace with the stock market. Moskovith continues: “You won’t see the same types of returns that you would if you were actually invested directly in stocks. Equity indexed annuities are meant to grow slower. You still keep ahead of inflation, and you get some participation in the market, but you aren’t in fully. But you are more protected. And it’s this protection that results in lower returns.”
Equity indexed annuities aren’t for everyone, though, Moskovith points out. “For the most part, these are designed mainly for those who want a guarantee of income. These annuities offer the promise of a regular income stream later life. It is important to realize that this type of investment is not completely liquid and you are locking up the money for years. Someone whose finances aren’t in a place where they can lock that money away probably should consider other options.”
Mariana Moskovith can be reached at 310-441-9393 ext. 114.
Disclaimer: I am not an investment professional. Nothing in this piece or on this Web site should be construed as investment advice. Before making investment decisions, do your own research and/or consult with an investment professional. All investment comes with the risk of loss. You are responsible for your own investment decisions and any loss that may result from your decisions.