The following three (3) exhibits demonstrate the powerful benefits of using an Equity-Linked Annuity Plan in both good (up) markets and poor (down) markets.
ELA's can be the ideal combination of stock-market-linked returns with no principal risk because the value of your account is based on the percentage yearly increases - NOT DECREASES - in such indices as the Standard's & Poor's 500, the most widely accepted and broad measure of the performance of the U.S. stock market.
The three (3) exhibits below illustrate a $100,000 investment for an investor, age 55, over 12 years, using a 70% index participation rate in the S&P 500. You will be amazed at the results.
Exhibit 1:
Exhibit 1 shows the period of time that the U.S. stock market (1966-1977), as measured by the S&P 500 Index, was generally poor (down or sideways) - see Annual Change In Index Value column. At the end of the 12 years, the investor received back $128,318 of his original $100,000 deposit AND if the investor has passed away, his heirs would have received $142,576!
Exhibit 2:
Exhibit 2 shows the period of time that the U.S. stock market (1988-1999), as measured by the S&P 500 Index, was generally good (up) - see Annual Change In Index Value column. At the end of the 12 years, the investor received back $395,182 of his original $100,000 deposit AND if the investor has passed away, his heirs would have received the same $395,182!
Exhibit 3 shows the period of time in the U.S. stock market (1991-2002), as measured by the S&P 500 Index, when the market was generally good (up) for roughly half the period and extremely poor (down) in the most recent 3-year market meltdown - see Annual Change In Index Value column. At the end of the 12 years, the investor received back $245,096 of his original $100,000 deposit AND if the investor has passed away, his heirs would have received $245,096!
Summary:
In all three examples, one can readily see that regardless of market conditions, the investor never risked their original principal, but is in fact guaranteed the greater of the index value or minimum account value (which includes the original principal + interest) regardless of which way the market trends.
Perhaps the best example is that in Exhibit 3, which shows how the ELA product performed during the most recent market downturn which lasted three (3) years (1999-2002). In this actual example, the investor increased their account value 145% over 12 years or 12.09% annually over the entire term WITHOUT ever risking their principal -despite the horrible performance in the market from 1999 through 2002!
Again, Equity Linked Annuity plans are designed for those that want equity or stock-market-driven potential results, yet DO NOT like the idea of ever risking their original investment.
Equity Linked Annuity are suitable for both after tax investment dollars or pre-tax (IRA, 401K, pension) investment dollars.
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Fielder Financial Management, LTD.
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