Monday, August 3, 2015

Alternatives Than Equity-indexed Annuities

Stockholders' Equity Indexed Annuities (EIAs) have become a hot commodity in the afternoon. I think you can easily find other alternatives that will bring better results, without locking up your money or collect shipments severe punishment. I will discuss this alternative in the two following articles. But first, you must understand two things: your purpose for investing and how the EIA.

Find out why you are investing. For simplicity, we consider the two goals of stability and growth. If you are very concerned about protecting your investment and obtain a steady rate of return, then your main objective is stability. On the other hand, if you are concerned to protect themselves against price increases, building a retirement nest egg or grow your wealth then your primary goal is growth.

It is unlikely that your goals will be 100% stable and 100% growth. Normally this would be a combination of both. For example, if you are aged 55 years and prepare for retirement, you may want to about 40% of the investment portfolio invested in "stable", such as a bond or CD, and 60% invested in actions such as mutual funds.

On the other hand, if you are 75, the stability can be a problem for you. You also want to plan for inflation, but the purpose is very different from one to 55 years. You can have a 70% stable investment and only 30% of their money in equities.

EIA Perhaps you have been told is the perfect answer. They are sold as provide stability and growth. Vendors say you can participate in the growth of the stock market without risk, always win at least 3%. It seems that the EIA will help you achieve both goals. A closer look, though, you will find that it has no end.

EIA is said to provide stability, as they provide a minimum return of 3%. Let us put this in perspective. In exchange for a minimum of 3% is needed to keep their money in investments over the years, or pay a penalty which in some cases could be the equivalent of more than 3 years in the value back!

In addition, at least 3% unchanged throughout long-term investment. If interest rates increase during those 7 to 12 years, you will not be able to take advantage of them. Imagine how you would feel if you knew you could win 5% or 7% on CDs or bonds guaranteed by the government, but you are stuck in an EIA paying 3%! EIA provides not only the stability of the measure.

So let's take a look a closer look at the growth offered by the EIA. Typically, your investment choices are limited to the S & P 500, Nasdaq, or an index associated with the link. But the EIA put a limit on how much you earn. If the rate increased to 25% or 50%, as they did in 2003, you can get 10% to 12%.

EIA only allows you to take part in only the results of the index, or they have internal charges of 1-2%. Even if the underlying index increases by 10%, profit will be lower. This makes sense when you realize the insurance must win back the large commissions paid agent. The insurance company may not pay at least 3% in bad times and help you get back 100% in good time.

Thus, in EIA, you take the risk of investing in the stock market, but not all back. Do not stack the deck against himself. When you invest in stocks, you should have access to thousands of choices, and get all the returns.

Bottom line: the trap of significant investment limit growth potential and shackles you with outrageous surrender penalties, all for a measly 3% promised return, while your agent walks away with a committee of 10 or 12%? No matter how you divide your portfolio between stability and growth, believe me, there are better ways to manage your money. I'll talk about them next week.

Saturday, August 1, 2015

Explain that the level of the pension fund used index

A Point-to-Point Year Monthly

Monthly changes in point-to-point in the index is determined by subtracting the value of the index the previous month with the current monthly index value and dividing by the value of the previous month'sindex. If this leads to a positive change of point-to-point and monthly index does not exceed the fixed ceiling, then it is used as an index for the month capped evolution. If more than the ceiling saying, so we use the word cover change Capped Index for this month.

Changes in point-to-point monthly negative index is not subject to the ceiling.

The "change Capped Index" was arrested for every month over a period of 12 months. The amount of 12 months' variation Restricted Index "will be the index credit rate on the date of obtaining the index. Credit tax credit rate multiplied by the value of the account's ability to determine the credit score.

Year Annual Point-to-Point

The annual change of point-to-point is determined by subtracting the value of the index of the previous year the value of the current year, the index and dividing by the value of the index 'last year. If this results in a positive annual change from point to point and the index does not exceed the fixed ceiling, then it is used as a change in the index this year. If more than the ceiling saying, so we use the change index closing report for that year.

Negative inflection point index point is not subject to the ceiling. Changes in the index is an index credit rate at the time the credit level. Tax credit rate multiplied by the value of the account's ability to determine the credit score.

The level of participation

Voters may also annuity to another and from time to time in certain annuity. It is therefore important for you to know how the level of pension contributions you work with the index method. High participation rates may be offset by other features such as simple interest, average, or index method of point-to-point. In addition, the insurance company can make a lower contribution rate also provide
present as an annual replacement indexing method.

Annual Point-to-point

Indexed interest, if any, based on the difference between the value of the index at the end of a period of one year and the value of the index at the beginning of a period of one year. Interest will be added to retire at the end of the annual period of one year replacement.