What are the pros and cons of equity-indexed annuities?
The major advantage of an equity-indexed annuity over other types of deferred annuity products is potentially higher interest rates available from links to equity indexes, which have historically provided significantly higher yields than fixed interest rate products. The major advantage, of course, may be the major disadvantage also, particularly in periods of index volatility. However, all equity-indexed annuities have an underlying minimum interest rate guarantee which guarantees you will never lose your premium due to index fluctuations or volatility. Thus, the equity-indexed annuity provides the best of both worlds: linkage to equity indexes with no risk due to index volatility, and safety of premium.
