Equity Indexed Annuities

An equity indexed annuity is an annuity like no other.

It gives you more risk, but more potential return than a fixed annuity, but less risk and less potential return than a variable annuity.

And as its name implies, its value is linked to a market index, such as the S&P 500 Composite Stock Price Index*, a collection of 500 stocks intended to represent a broad segment of the market.

Designed for retirement saving

Like other types of annuities – fixed or variable, immediate or deferred – indexed annuities are long-term vehicles designed to help you save for retirement.

Keep in mind, that if you take your money out early, you may have to pay surrender charges and, if you’re younger than 59½, an additional 10% tax penalty. Naturally, if you take an early withdrawal, your death benefit and the cash value of the annuity contract will be reduced.

It is also important to understand that:

• Indexed annuities don’t directly participate in stock or equity investments
• Withdrawals or surrenders before the expiration of an indexed period will result in no index participation for those amounts
• Failure to maintain the contract until it matures may result in no participation in the equity index
• Actual returns may be less than the return of the linked index - possibly even negative if you surrender any of the contract before the expiration of any applicable surrender charge period

How account interest is determined

While sales of indexed annuities have grown in recent years, some of their features can be difficult to understand, such as the various methods for calculating the interest.

Some common methods include:

• Annual reset/ratchet based on the annual change in value of the index
• Point-to-point based on the change in the index’s value from the beginning to end of the annuity’s contract term
• High water mark based on the increase in index value from the beginning of the contract’s term to the highest index value at various points during the contract’s term – typically contract anniversaries

 Other factors can influence indexed annuity value

• Participation rates – The participation rate is how much of the index increase you actually receive. For instance, if your participation rate is 75% and the index increases 8%, you’ll earn 6% for the period (75% x 8% = 6%).
• Interest rate caps – Some indexed annuities have a maximum rate - or cap. Here’s how it works:
  • If the market goes up less than the cap, your account value will be credited with 100% of the annual performance of the index, not including dividends or distributed capital gains
  • If the market goes up more than the cap, your account value will be credited with the amount of the cap
  • If the market goes down, your account value remains the same, less any withdrawals you may have taken
• Fees and charges – The fee you pay - also known as the margin or spread - is generally deducted from the interest you earn. For instance, if you pay a 2% fee and the index earns 9%, you would actually be credited 7% (9% - 2% = 7%).

 

Not a deposit • Not FDIC or NCUSIF insured • Not guaranteed by the institution • Not insured by any federal government agency • May lose value

*  “Standard & Poor’s^®”, “S&P^®”, “S&P 500^®”, Standard & Poor’s 500, and 500 are trademarks of The McGraw-Hill Companies, Inc. and have been licensed for use by Nationwide Life Insurance Company. The product is not sponsored, endorsed, sold or promoted by Standard & Poor’s and Standard & Poor’s makes no representation regarding the advisability of purchasing the product.

It’s important to understand that the guarantees and protections offered by fixed and indexed annuities are subject to the claims-paying ability of the issuing insurance company.

Annuities are issued by Nationwide Life Insurance Company, or Nationwide Life and Annuity Insurance Company, Columbus, Ohio

NFW-1512AO.1