In an Investor Bulletin, the SEC Office of Investor Education and Advocacy ("OIEA") highlighted the risks associated with indexed annuities.
The OIEA outlined possible risks associated with indexed annuities. Investors, the OIEA stated, risk losing money due to (i) withdrawals during a time period, (ii) withdrawals during a surrender period, (iii) a tax penalty triggered by certain withdrawals, (iv) a decline in the market index or (v) an insurance company becoming unable to fulfill its obligations under the contract.
In addition, the OIEA provided information on how returns are calculated with respect to both gains and losses, and the indexing methods used in the contracts.
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