Which statement is true regarding equity indexed annuities?

Equity indexed annuities are specifically structured to provide returns linked to the performance of a stock market index, such as the S&P 500. This relationship allows the annuity holder to potentially benefit from stock market gains while also enjoying certain protections against losses. While these products might offer some level of guarantees, they do not provide a fixed return and are subject to limitations based on the performance of the index, thus full exposure to market risk is not present.

The nature of equity indexed annuities is such that they are typically longer-term investments rather than being designed for short-term savings, which aligns with the retirement planning goals of many consumers. The guarantees can vary, and some may be accompanied by fees, but these products are not primarily intended for short-term financial strategies.

Comparatively, while they may have certain costs, their fee structures are not uniformly higher than those of mutual funds; in fact, they serve different investment purposes and have distinct operational methodologies. Therefore, the statement about returns being contingent on a stock market index accurately encapsulates the core feature of equity indexed annuities, making it the correct choice.