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Subject:  Re: Indexed CDs Date:  8/18/2011  4:42 PM
Author:  pauleckler Number:  69436 of 88091

This product sounds remarkably like an index annuity. Here is a thread about them from the annuities board--

1. Read the contract carefully before you sign. Your funds may actually be with an annuity company. You can have high surrender fees.

2. Caps (or partial participation rates) often mean you get less than the full gain from the underlying index.

3. The guaranteed return can depend on annuitizing the contract, but many don't do that because they would rather assets went to their heirs.

4. Many are dissatisfied with the less-than-promised return actually received but surrender fees make it difficult to do anything else.

My aunt had her bank sell her an annuity with "guaranteed yield" when one of her CDs matured and she was unhappy with the lower CD interest rate offered. It turned out the guarantee was only for a few years, after which the yield fell by half. But she was stuck leaving her money there because of the surrender fees.

It was a bad investment, sold by a reputable bank.

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