Understanding Equity Annuity Risks: Can You Lose Money?

Equity annuities are a type of annuity product that are linked to a financial index, such as the S&P 500. When you invest in this type of annuity, the returns will depend on the performance of the index. However, most of these annuities also come with a minimum amount of return. 

Even though most equity annuities have a minimum amount of interest that you can earn every year, it is possible to lose money when investing. The fee is due to the fees from the insurance company. This type of investment could have a fee charged on the front end when you make your payment to the insurance company. They can also collect a margin on the amount of return that is generated from the investments. 

If you decide to get out of your equity annuity relatively quickly after purchasing it, it could also cost you a significant amount of money. Generally, if you cancel your annuity within 6 years, you will have to pay surrender charges. These fees will usually eat up any of the returns that you have earned.