Fixed Index Annuity

Q: I was recently pitched on a Fixed Index Annuity called Allianz Endurance 15, which pays a 15% bonus on the principal premiums for the first three years. This is supposedly tied to your choice of Foreign Stock Market - or NASDAQ which somehow equates your return.

The past three years linked to our stock market is supposedly yielding investors over 30% profit. Is this hype or for real? I am 56 & considering putting $10K in this from an IRA - since I was assured you can never lose your principal or the 15% bonuses. Is this a wise decision or am I better off just leaving my IRA in the Fidelity Freedom Fund that it's in now?

This is basically a contract with an insurance company and some of them can be risky too. I own rental properties that stay rented, but would love to make the most money I can out of my IRA. It did well in Fidelity Low Priced Stock mutual fund until I moved it to their more conservative Freedom Fund recently. I was just curious about this type of Annuity.

A: I am not a fan of Equity Indexed Annuities and many people find that they work much differently than they expected. There's no such thing as a 'free' bonus, you... may only receive it if you fulfill all the details of the contract. In this case, it sounds like that can take 15 years.

Personally, I would prefer the Freedom fund where I could retain complete control and flexibility. Then I wouldn't have to worry about massive surrender penalties if it turned out I didn't like the annuity or my situation changed and I needed that money.

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