Should I invest in a hybrid fixed indexed annuity?

I am thinking about putting my life savings into an annuity that is supposed to pay me an 8% signing bonus and 7% compounded interest over a 10 year period with no risk of losing my initial investment. The product is casually referred to as a Hybrid Fixed Indexed Annuity, and is named Security Benefit Secure Income Annuity (SIA) through Security Benefit Insurance Company. My question(s): Exactly how is the initial investment guaranteed? The sales people call it GIC, which they call Guaranteed Investment Contract. It looks like it is covered by my state (Michigan) and that really helps with peace of mind. But I am wondering if there is a connection that goes beyond my state. I am looking for more protection that is if more protection is appropriate. Anything you might add to my understanding of the "risk" to initial investment would be greatly appreciated. Thank you

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January 2016
75% of people found this answer helpful

I don't ever like to hear the words "I am about to put my entire life savings into.." pretty much anything.  Be very careful about the fine print, including "caps" to earnings "participation rates" withdrawal rules, and the like.  If you cannot explain to me exactly how the money grows, what your investment will be worth if the market goes up 10% or down 10%, what the surrender period is and what are the exceptions, and what all the rules are regarding how you take your money out in retirement - then don't go here.  The investment is "guaranteed" by the issuing company.  Some fixed annuities are issued not by traditional insurance companies but by investment firms, which typically pay higher rates, but are less secure than the traditional insurance company issuers.  My advice is to diversify your holdings.  Never put all of your savings in one product - especially something illiquid (meaning you can't get out your money without a penalty).

February 2016