An annuity makes periodic payments to the holder of the annuity. Fixed annuities make fixed payments and variable annuities make variable payments. Equity-indexed annuities (EIAs) are similar to both fixed and variable annuities in that they pay an interest rate linked to an equity index and guarantee a minimum interest rate. EIAs are especially marketed to retirees by the insurance industry.
Forbes published an article on EIAs. The article evaluates the claims made by typical marketers of EIA and explains how such claims are either not true or should be heavily qualified. Dr. Craig McCann, founder of SLCG, is quoted in the article. He has written a paper called ‘An Economic Analysis of Equity-Indexed Annuities’ which argues that equity-indexed annuities are complex contracts whose true risks and costs are often obscured and that the lack of SEC oversight and regulation have resulted in ‘unscrupulous’ sales practices of equity-indexed annuities issuers.
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