ANNUITIES

The opposite of life insurance. The three basic types are variable, fixed and equity indexed annuities.

Variable annuities are managed similarly to mutual funds and not all have guarantees that protect the value of the account, the value will never be less than the original amount invested at death.

Fixed annuities pay a set rate over a set period of time some have first year bonuses and pay interest rates competitive with certificate of deposits.

Equity indexed annuities have returns tied to a popular index such as the S&P 500 or Lehman Brothers Aggregate Bond Index. The account is protected from market losses. The cost of the protection is done via a participation rate (a percentage of the market gain), a cap (maximum limit on gain) or some other expense or a combination of the three. The account will never decrease in value, the worst case scenario is that the account stays the same. Earnings for all annuities grow tax deferred.

The two periods associated with annuities are the accumulation period where the account grows and the annuitization period where the account is set and the payout phase begins. Depending on the options selected the payout may be based on only your life, both you and your spouse or co-owner, with and without a specified period of time.