A buffer and a floor are two options that limit exposure to market loss.
Equity index annuity floor.
A floor of 0 is applied to the annual total.
Each month s return is capped at 1 5.
A 0 floor assures that even if the index decreases in value the index linked interest that you earn will be zero and not negative.
The indexed annuity annual crediting rate is based on the sum of the monthly changes in the s p 500 index.
In this case you would be exposed to the percentage loss up to the floor amount but you are protected against any loss after this percentage.
Indexed annuities are sometimes referred to as equity indexed or fixed indexed annuities.
The returns may be higher than fixed instruments such as certificates of deposit money market accounts and bonds but not.
A fixed indexed annuity is not a registered security or stock market investment and does not directly participate in any stock or equity investments or index.
The most common floor is 0.
Percentage of downside protection typically 10 20 or 30 percent.
In most fixed indexed annuity contracts the floor is 0.
An equity index annuity is a contract with an insurance or annuity company.
A 0 floor assures that even if the index decreases in value the index linked interest that you earn will be zero and not negative.
For example if an index declines 15 percent and you choose a 10 percent buffer you would incur a loss of 5 percent.
Fixed indexed annuities credit interest in part based on changes to a market index such as the standard poor s 500.
This cross between an indexed annuity and a variable annuity has gained attention in the investment worldand not all of it positive.
The most common floor is 0.
For the 1 year illustration chart the s p 500 index returned 4 38 including dividends while the annuity s credited rate is calculated to be 0.
Key takeaways an indexed annuity pays a rate of interest based on a particular market index such as the s.
An indexed annuity in the united states is a type of tax deferred annuity whose credited interest is linked to an equity index typically the s p 500 or international index.
Opposite of the buffer option.
Floor on equity index linked interest the floor is the minimum index linked interest rate you will earn.
An equity indexed annuity is a fixed annuity where the rate of interest is linked to the returns of a stock index such as the s p 500.
Floor on equity index linked interest the floor is the minimum index linked interest rate you will earn.
It guarantees a minimum interest rate if held to the end of the surrender term and protects against a loss of principal.
Equity indexed annuities may appeal to moderately.
