One annuity product under fire has been the equity indexed annuity. Equity indexed annuities are those annuities that have their returns based upon the performance of an equity market index such as the Dow Jones, the S&P 500 or the NASDAQ. With these products, the investor’s principal investment is protected from losses in the equity market, while the gains add to the annuity’s return. NBC’s Dateline ran a story that supposedly debunked equity indexed annuities, stating that these products were simply awful for retirees. The story, entitled “Tricks of the Trade,” highlighted hidden camera footage of insurance agents trying to sell indexed annuities to senior clients. The program uncovered that some sales agents weren’t disclosing that the annuities have surrender penalties if the investor withdraws the entire principal before a certain time period has expired. What the sales agents were doing was unethical and fundamentally misguided. The truth of the matter is that index annuities have been producing returns since the first one was purchased in 1995.  These products are not considered liquid investments, and in most cases they have formidable surrender charges. However, unlike some assets that are traded in the open market, indexed annuities are private contracts, similar in that respect to non-negotiable bank CDs. These annuities are not traded in the open marketplace and therefore they have no market price. Although opponents of index annuities commonly cite surrender fees as a negative issue, these fees are typically required by state insurance regulators in order for policies to qualify for sale. In fact, inadequate surrender fees have often attracted hot money in the past and have even led to insurance company insolvency. Fixed indexed annuities actually provide a guaranteed minimum return along with principal preservation at each point in time, as well as other options that mutual funds and other similar investments don’t provide. In addition, unlike mutual funds, a fixed indexed annuity does not deduct sales charges, management fees or 12B-1 marketing fees. Rather, the insurance company uses a small amount from the underlying portfolio, which lowers participation in the market index to cover administrative costs and commissions to brokers. These annuity products may easily be cashed in with the issuer at any time and at prices that are typically pre-specified in the contracts. It should also be noted that both CDs and fixed indexed annuities have surrender penalties for premature withdrawal or early surrender, but both are easily convertible into cash. Opponents of indexed annuities have typically not done much comparison of these aspects with other similar products. There is a fourth type of annuity that we have yet to consider: Hybrid Annuities Federal law has created one class of annuities that is often used to provide help to a healthy spouse when their ill spouse needs nursing home Medicaid – the Single Premium Immediate Annuity (SPIA). The client writes a check for the total amount of the investment, and the annuity company takes the client’s money and pays it back to him/her month-to-month in equal payments over a determined period of time. If you’re ready to start getting your estate in order and secure your assets for the “worst-case” scenario, please give our office a call at 800-310-3100. Your first consultation is absolutely free.  We’ll let you know what steps you need to take, right now, to protect yourself and your family.  Call now. Rick Law Elder Law Attorney at Law Elder Law, LLP Rick was named the #1 Illinois elder law estate planning attorney by Leading Lawyer Magazine. He has been quoted in the Wall Street Journal, AARP Magazine, TheStreet.com, and numerous newspapers and articles. Rick is the lead attorney for Law Elder Law, LLP, focusing in Estate Planning, Guardianship, and Nursing Home Solutions. His goal is to give retirees an informed edge when it comes to dealing with an uncertain future.  Get flexible retirement strategies that work during good times and bad, plus information on how you can save your home and assets from being used to pay for long term care.  Appointments available in Chicago, Aurora, Oak Brook, Schaumburg, and Joliet.  Call 800-310-3100 for your free consultation now!