History

• Annuities have long been available from insurance companies in the form of fixed- and variable-annuities. In the mid 1990s, index "linked" annuities were introduced.
  
  

Tax Deferral

• As with other insurance annuity products--investments used as retirement planning vehicles--equity index annuities offer the benefit of tax deferred accumulation and growth until withdrawal.
  
  

Sub-accounts

• As opposed to fixed annuities, variable and index annuities have growth potential. Variable annuities offer the full measure of performance of the underlying mutual fund (sub-account) while index annuities proved a stated percentage of the underlying index return--such as a 70 percent participation rate.
  
  

Principal Guarantee

• Index annuities offer a guarantee of most--if not all--of the principal investment. The guarantee is made based on the full faith and creditworthiness of the insurance company.
  
  

Penalties

• If an annuity is redeemed or withdrawn before retirement age, the withdrawal will be subject to penalties just as an IRA or other retirement plan premature distribution would be.