Equity-Indexed Annuities (EIA): Bad Investments Especially for Seniors

Equity-Indexed Annuities (EIA): Bad Investments Especially for Seniors - http://www.forbes.com/columnists/columnists/free_forbes/2005/0919/240.html

Equity-indexed annuities EIA are contracts with insurance companies that pay investors part of the capital appreciation in a stock index and guarantee a minimum return if the contract is
held to maturity.

Even though the NASD has issued an investor alert about EIA sales practices and the SEC has warned investors about the complexity and hidden costs of EIAs, sales for these terrible investment products have soared to $20 billion per year.

Sales abuses are rampant because EIAs generate enormous commissions and are not regulated by the investment industry. Profit over people seems to be the rule of thumb when EIA sales are in the horizon.

Equity indexed annuities are purposefully complex making it impossible for investors to determine their true costs. EIAs have hefty surrender charges which can last throughout the contract's life. Equity indexed annuities guarantee a minimum rate of return, applied to the adjusted cash surrender value but often only if the annuity is held to term, typically six or seven years.

The EIA rules are many and complicated, certainly more complex than most average investors can comprehend and even seasoned investors.

There are three common indexing formulas used to translate the change in the index level into a gross return on the contract thus adding to the complexity of understanding EIAs..
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Both the SEC and the NASD caution investors to review and understand the impact on returns of the various EIA features. No one who sells EIAs truly understands them; all they understand is the huge commission. Despite all the complex formulas and hidden costs and surcharges, EIAs still manage to be sold to investors.

Are you the victim of an unscrupulous EIA sales agent? Has someone promised you the world but you woke up to find out there are too many strings attached and no one has the answers?

If yes, we recommend that you talk to an investment lawyer who has handled similar cases and may be able to handle yours too. How can we help? Please answer a few questions so we can assess your situation.