Annuity Type 1: Equity Index Annuities

After the stock market and interest rates declined sharply in 2001-2003,
these annuities skyrocketed in popularity. With returns based on how much
the stock market rises, these annuities offer the potential for superior returns
with little risk to principal. However, equity indexed annuities are very
complex and vary widely from company to company. I believe you should
not use these annuities unless you absolutely understand how the contract
you are considering operates.

My experience is that many of these contracts contain provisions which are
not to the investors’ benefit and are not immediately apparent. If you decide
to use one of these, read the prospectus and contract very carefully.