If you are getting confused do not be, we are going to take a look at a few basic facts about indexed based annuities.  Equity indexed annuities fail to include the dividend gains.  The dividend earnings have made up almost half of all the common stock earnings in the last fifty years.  The gains you would have made in the stock earnings are actually capped, preventing you from gaining as much as you would otherwise.

Equity based annuities are by far and away the most heavily penalized when it comes to taking your money out before the predetermined maturity date.  Money is therefore taken out of your pocket and withheld by the insurance company so they can meet their own margins.

Any time you are making a purchase based on commission sales it is important to know if there are different commission percentages for different products as this will often times affect what you are being sold, this is the case for equity indexed annuities.

While four or five percent are normal commissions these annuities offer the salesmen in excess of ten percent.  When you know the normal commission rate is five percent and you are being charged ten, you know something is up.  The sales guys are so adamant about selling these because they are what is in their best interest not yours.  You bottom line could really see some improvement in these investment types if so much of it weren’t going to the salesmen.

Al lot of people fell they were done wrong by their annuity provider and wonder why they were sold such a shoddy investment.  If you type ‘class action lawsuit’ and ‘equity based annuity’ into google you will find enough results to see a clear picture of the way these investments always seem to pan out.  I would rather purchase structured settlement than have to deal with all the smoke and mirrors of an equity based annuity.

The first thing you need to consider is how often you will want to have access to the cash.  The less often you need the cash the higher the interest you earn will be.  For example you can earn four percent or so on a CD which is a certified deposit.  The bank will require you to leave the money alone for three months at least, if not you won’t qualify for the interest you earned.

If you don’t need the money for a few years or say you have a small seed amount you want invest now to pay for a family vacation when your kid turns 16, or what is more likely you will have an investment goal for when that kid turns 18 – college.  So you start with a few thousand and invest it in a mutual fund rather than a savings account, this way the risk is hedged but still around ten percent, which is two to three times as much as what you would get in a regular savings account.

Then there are the rest of us who just want the best way to invest our cash but still have access to it.  Here is the plan, enroll in an online savings account from ING or any other internet bank and have your paychecks deposited into it, then just withdraw any of the money you need into your regular checking account, its super easy.  What this allows you to do is benefit from a four percent or higher interest rate on all your savings, and still withdraw what you need.  Internet banks are the best place to get a high interest savings account because they don’t have the same overhead costs as your local bank.  If you are looking for other investment options consider purchase structured settlement as a way to go.