That makes shopping for EIAs tricky. Also important is the calculation of that percentage. You'll also earn a small return on the premium. You'd lose nothing that year, and in the second year your new starting point would be 1000. You then benefit when it rises above 1000.
Ratchets usually outperform in a bear market, but underperform in a bull.
But in less stellar years, Powerhouse will actually outperform EIAs that charge fees. In a bull market, no EIA is going to outperform a simple index mutual fund. And as yield vehicles go, they can't compete with a fixed-rate annuity. But in a dicey market, their no-downside feature and the potential upside make for an attractive combination. The McGraw-Hill Companies Inc. All rights reserved.