Overview – What are fixed annuities?

Fixed annuities are interest based investments like CD’s but are issued by insurance companies. They are designed primarily for retirement savings. They will pay a predefined amount of interest for a preset number of years. Usually they outperform bank CD’s and money markets.

Fixed annuities can be immediate or deferred.

Immediate annuities are paid for with a single upfront premium payment. The payouts then occur monthly for the duration of the contract. If the client has selected the lifetime option, then the payouts continue for the entire life of the client.

Deferred annuities usually have a series of premium payments made over time. During this time, earnings accrue tax deferred. Once the client reaches 59 and ½ they can start their payouts based on their premiums plus the earnings over the deferment period.

Performance

You can expect secure, guaranteed growth from a fixed annuity investment as long as you don’t terminate prematurely. In the case of deferred annuities the tax deferral is going to accumulate and compound regularly, earning much more than a CD, money market account, or even a lot of mutual fund. The longer your period of deferment, the more advantageous your tax deferment is over other investment types.

The Features of Fixed Annuities

The individual features of fixed annuities vary greatly based on the insurance company underwriting and the particular product. These are some of the features commonly found:

• Single Premium — One payment at the inception. Future investments require purchase of a new annuity.
• Guaranteed Interest Rate — The contract locks in a fixed interest rate for a predetermined number of years, like a bond or CD.
• Low Risk of Capital — Money can only be lost if the insurance company fails. Most states have guarantee funds to protect customers in the event of a company failure. Check your state’s
  limits.
• Retirement Income Stream — Great source of secure monthly retirement payments.
• Strong Returns — Solid returns for a very low risk investment. Better than bank CDs, especially at longer terms because of the tax deferrals.
• Life long Income — An optional lifetime option guarantees monthly income for life. You have peace of mind knowing that you won’t run out of retirement money no matter how long you live.
• Choice of Year Terms — Fixed annuities are available for a wide variety of term lengths. The longer the term, the higher the returns.
• Life Insurance — An optional life insurance provision offers death benefits for your family. You can save money by not needing a separate life policy.
• Unlimited Investment Contributions — Unlike a 401(k) or an IRA, you can invest as much as you want and buy as many annuities as you need.
• Inheritance — Annuities have special treatment as death benefits. They are not subject to estate taxes and bypass probate.

Disclaimer: This is not investment advice. All information on this website is intended for your educational purposes only and is not intended to make a recommendation that you purchase an annuity. We are not liable for any potential damages that may be incurred from this information or your use of it. You should always consult a licensed financial or insurance professional and complete a suitability review before investing. Detailed product information such as Surrender Yields, Premiums, Age Restrictions, Riders, Fees and Withdrawals provisions may vary by product, and can vary based on state availability and are subject to change without notice. Some products are not available in all states, and will be provided by a licensed Annuity Agent.

The optional lifetime income benefit riders are used to determine the lifetime payouts only and are not available for cash surrender or as a death benefit unless stated in the annuity contracts and any attached riders, endorsements and amendments. Some fees may apply which are listed in your contract. Surrender fees apply to the base contracts. All guarantees are based on the financial strength and claims paying ability of the insurance company. They are not FDIC or NCUA insured. It is very important that you read all of the insurance contract disclosures carefully before making any purchase decisions. This does not represent taxation, legal, or investment advice.