Warning

Info

Warning

Info

Warning

Info

LSDefine

Simple English definitions for legal terms

Investor Protection Guide: Equity-Indexed Annuities

Read a random definition: books of account

A quick definition of Investor Protection Guide: Equity-Indexed Annuities:

An Equity-Indexed Annuity is a financial product offered by insurance companies that promises a minimum guaranteed return combined with a return linked to a market index. It has two periods: an accumulation period where an investor makes payments to the insurer, and a payout period where the insurer makes payments to the investor. However, EIAs have many potential disadvantages, including surrender charges and tax penalties if cashed out early. EIAs are complex and can be difficult to understand. Investors should pay attention to participation rates, interest rate caps, and administrative fees. They should also investigate the financial strength of the insurance company offering the EIA. EIAs are not right for all investors and require careful assessment, research, and questioning.

A more thorough explanation:

An Equity-Indexed Annuity (EIA) is a financial product offered by insurance companies that provides a minimum guaranteed return along with a return linked to a market index. It has two periods: the accumulation period, where the investor makes a lump sum payment or a series of payments to the insurer, and the payout period, where the insurer makes a lump sum payment or a series of payments to the investor.

However, EIAs have several potential disadvantages, such as surrender charges and tax penalties if the investor cashes out early. The minimum return guarantee may also not kick in until the account has been active for a set period of time. EIAs are complex instruments, and each EIA can vary greatly. Different EIAs use different methods to calculate gains in the index, with each method having distinct advantages and disadvantages.

Investors should pay attention to the following elements of EIAs:

  • Participation rates: The higher the participation rate, the greater the impact of an index gain on the value of the annuity.
  • Interest rate caps: Specifies a ceiling for the impact of a market index. For example, if the linked market index increases by 10% and an EIA has an interest rate cap of 8%, the investor only benefits up to the cap (8%).
  • Administrative fee: This provision can affect the benefits an investor receives by reducing the return from a gain in the linked index by some percentage.

Investors should also investigate the financial strength of the insurance company offering the EIA to ensure they can make their payments. EIAs are not necessarily fraudulent, but they are not suitable for all investors. Investors considering an EIA should be prepared to assess the instrument in detail, conduct research, and ask questions.

For example, an investor may purchase an EIA with a participation rate of 80%, an interest rate cap of 6%, and an administrative fee of 2%. If the linked market index increases by 10%, the investor would only receive a return of 4.8% (80% of the gain minus the 2% administrative fee) due to the interest rate cap and administrative fee.

Another example is an EIA that guarantees a minimum return of 2% per year but only kicks in after the account has been active for five years. If the investor cashes out before the five-year mark, they may incur surrender charges and tax penalties.

Source:

Investor Protection Guide: Auction Rate Securities | Investor Protection Guide: Internet Fraud

Warning

Info

General

General chat about the legal profession.
main_chatroom
👍 Chat vibe: 0 👎
Help us make LSD better!
Tell us what's important to you
22:47
@ParallelAgreeableOrangutan: law school data so just passion.
22:47
@NemoPropheta: noo they drug test before the LSAT! U will get flagged!
ParallelAgreeableOrangutan
23:19
I'm intrigued llama
ParallelAgreeableOrangutan
23:21
Holdddddup all that number crunching on your lsd profile is your work? Damn
ParallelAgreeableOrangutan
23:21
I don't visit y'all's profiles enough, clearly
NarrowFaithfulCougar
0:22
@NemoPropheta: Ahh yeah, the Sauna. That's some good Nordic shit. Beats the hot tub hands down. Plus everyone is naked.
1:23
@ParallelAgreeableOrangutan: got that weaponized autism in gear, we out here.
@llama: your cycle confuses me, your stats are good and you applied early but all of those Rs? Is there anything weird about your app?
do you have C&F issues or something?
also ur first choice is kansas but you didnt apply there?
12:55
@RasheedWallaceFan: Hi. Yes, I waited for April LSAT, put almost all apps (which were sent really early) so that basically most of my apps were reviewed In May. Shot myself in the foot for 155 -> 161 lmao. Would not recommend 10/10
12:57
@RasheedWallaceFan: unironically, KSLS was my top choice, however by April LSAT their app had closed. It was like waiting to date ur dream partner, but waiting until you graduate uni, then by the time u graduate uni, your soul mate is already married with 2.4 kids and 1.6 dogs. Heartbreak.exe fr fr
12:58
are you R&Ring?
13:00
No, I think what I will do is flip a coin: heds NKU, tails NEL|B what u guys think bout dat. Then once 1L - if good at LS, try to transfer, if bad at LS or one of my grandiose ideas/inventions are viable, drop out and pursue.
oh so you submitted the apps with a lower lsat and then retook
got it
Bettercaulsaul
13:33
Most schools will hold your application for the next test score to be released into your account as well. I was notified by an admissions director that if a decision is processed they will not retroactively go back for the new score even if higher
ParallelAgreeableOrangutan
13:34
I vote NEL-Boston so we can be friends :D
ParallelAgreeableOrangutan
13:34
But it says you withdrew?? :(
ParallelAgreeableOrangutan
13:41
@Bettercaulsaul: in my experience, there is often an option on the application for you to choose whether you'd like them to review your application as-is ASAP or hold it until your new score is released. but it probably varies by school—I just remember seeing that option on at least a few app forms
2:21
While I am unsure of what option you are referring to, I personally just emailed each school and asked for them to hold my app pending my lsat score release.
2:22
Sorry WNE = Western New England not NEL|B
14:50
Hey guys is anyone online rn
14:51
I need adviceee
15:48
shooooot
hey y'all so im gonna be honest im completely new to all this, i kinda bullshitted and took the LSAT and i have no clue what my odds are of getting into schools. 163 LSAT, 3.17 GPA, and a double major in undergrad i may write about in an addendum
Based on the list I see you made on your profile, you will need to make significant LSAT improvement for those schools to be contenders. Your primary focus should probably be working to get your LSAT practice tests up to a number you are happy with before you retest, and then test until you get a score you like. Don't rush an application cycle or apply late since those will hurt your odds of getting into your school as a splitter. Good luck!
oh that was literally just random stuff i dont know how this works
thank you so much!
im retaking in 4 days, and maybe again in august, and i was gonna apply to see what i got, and if i didnt like it i was going to wait till next cycle and work on improving my GPA
LSD+ is ad-free, with DMs, discounts, case briefs & more.