What is an Annuity?

• A tax deferred contract between you and an insurance company. Think of it in terms of a CD that you would get from a bank. An annuity is not backed ny the FDIC it is backed by the strength of the issuing insurance company.
• Annuity values accumulate without being tax until you decide to withdrawal money. When you withdrawal money that withdrawal is countable for tax purposes.
• Your money can grow much faster in an annuity than a taxable investment yielding the same rate because you have the power of "triple compounding". You earn interest on you principal, interest on the interest, and interest on the money that you do not pay taxes (if you are in a higher tax bracket, this could be a big difference).
• Most will avoid the publicity and hassles of probate. The value of you contract is left to beneficiaries in a lump sum or as an income for a specified period or life. Note that all contracts are not identical and some pay out options are restricted.
• Annuities can provide income for the rest of your life. AN INCOME THAT CANNOT BE OUTLIVED!

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EQUITY INDEXED TAX-DEFERRED ANNUITIES

• Allow accumulated values to grow tax - deferred.
• Offer safety with potential for higher gains. Guarantees a minimum interest rate and allows you the potential of any market-linked growth without the potential of any market-linked loss due to economic downturns.
• Ideal for conservative investors such as CD' s or fixed annuities.
• Some products will give bonus points that cannot be taken away.
  

Example :

A 58 year- old man wants to save more for his retirement. He deposits $100,000.00 into a bonus equity-indexed annuity. He receives a bonus of 10% and then is allowed to index in the market. His contract value is now $110,000.00 regardless of what the market does that year.

He can index the contract into several indices including the Dow Jones, S&P 500 mid caps, and S&P 400. Let's say that he decides to put $110,000.00 into the Dow Jones index. That index is at 8000 on that date and 1 year later it is at 8800. That is a gain of 10% less whatever the margin is (or fee). Lets say the margin is 2%. His net gain was 8% taking his account value to $118,800.00.

He is locked in that level regardless what happens in any future contract years. Obviously, your contract would be different if you took any withdrawals.

Most contracts will offer you the ability to take out 10% penalty free each year!

With an annual reset provision, if he decides to do the same thing the following year and the experiences a correction and falls from 8800 to 7900, he loses nothing! He remains at $118,800.00. Then in the next year he can participate when and if the market experiences a correction coming back up because he reset at the lower point (7900)!