DOC1604, you asked:

<< I have been offered an annunity, indexed to the S&P500. If the S&P500 rises, my return is 3% less then the incerase. If the S&P500 falls, my money stays the same, no loss. The S&P500 average used as a baseline is reestablished once each year. What do the Fools think? Is this a good way to protect my retirement funds, while having the opportunity for market growth. I am 66 and semi-retired. Comments are appreciated. Doc. >>

Aside from the usual "annuity" argument issues, what Index Annuities ("Equity Index Annuities") offer is an opportunity for a conservative investment to earn more than what a Fixed Annuity would provide without the market risk that Variable Annuities present. An Index Annuity tied to the S&P500 are NOT designed to give one the same return as one might get if actually invested in a S&P500 account (like one can do in a Variable Annuity). In the Equity Index Annuity, one will ALWAYS get less than what the index actually returns. Hopefully one will do better even though there may be a guaranteed minimum rate of return of 3.5% or so is less that what a Fixed Annuity might produce. As long as this is a LONG TERM position, a conservative investor can do better than a Fixed Annuity . . . but there is still no guarantee that you will do better than a Fixed Annuity - and, you won't have to worry about loosing any principle.