Equity Index Annuities
Equity Index Annuities allow you to participate in the markets gains, while protecting you from any market losses. Not only does your account never lose market value, but you can never drop below the highest point you have reached. If you look at the chart, you will see that in years 1, 2, 3, 5, and 6, that the returns on the mutual fund IRA were twice that of the equity index annuity.
However in year 4, you can see with the mutual fund IRA (which can be any investment type of IRA), what goes up can also go down, but this is not so in an Equity Index Annuity because your account value can never drop. And for this reason, if you look at the total value after 6 years, you can clearly see the financial gains are because you’re getting complete downside protection from stock market downturns.
Single Premium Immediate Annuity (SPIA)
The beauty of a Single Premium Immediate Annuity (otherwise known as an “SPIA”), is that it alleviates a person’s worst fear of running out of money. The way an SPIA works is you deposit a lump sum with an insurance company, and they turn around and pay you a monthly check. The check can be for as little as 10 years, or it can last your entire lifetime. The downside of an SPIA is that once you deposit the money with the insurance company, it is locked up and you can’t access it aside from the monthly checks they pay you.