Fixed Annuities

Virtually all of us search for ways and means to save our money in a manner that is secure, and yet provides a good rate of interest. Amongst the savings options available in the market today annuities are perhaps the safest choice. An annuity is essentially an insurance policy but can also be considered for investment purposes due to the tax benefits that it provides. Furthermore the terms and conditions of annuities make it an ideal tax-deferred retirement plan. There are many different types of annuities that suit the needs and requirements of various people. Fixed annuities are characterised by the fact that they are for a specific time period and have a pre-determined rate of interest. Once the guaranteed period is over the rate of interest may be revised. As long as the insurance company is solvent it guarantees both the principal amount as well as the interest. The individual does not have to pay tax until the money is withdrawn. The fixed annuity is a great choice for an investor who wants to earn a steady rate of interest on his or her money without putting it at risk. There are various types of fixed annuities:

Equity Indexed Annuity: This type of an annuity promises a basic rate of interest and also its worth is determined by a specific stock index performance.

Market-Value-Adjusted (MVA) Annuity: This type of an annuity offers a fixed time period and interest rate and also allows the investor the freedom to withdraw money before the end of the term period. The MVA is made based on change in interest rates.

Single Premium Fixed Annuity: As the name suggests a one-time premium is to be paid and no adjustments can be made.

Flexible Premium Fixed Annuity: After the initial premium is made the flexible premium fixed annuity allows additions to be made. The initial premium for the flexible premium fixed annuity is usually lower than for the single premium fixed annuity.

Immediate Fixed Annuity: The immediate fixed annuity provides a regular income that begins soon after the premium is paid.

Who should invest in fixed annuities?

Fixed annuities are ideal for the conservative investor who wants to insure that his principal amount and interest are guaranteed. The rate of interest of the fixed annuities appeals to such investors who don’t want to be worried about the fluctuating equity market. This type of annuity, like others, offers tax deferral.

When the time comes for repayment an investor may choose to select one of three options. He or she can choose to receive income for lifetime or get checks for a fixed period such as five to 30 years. Fixed annuities can be held jointly and in case either of the partners dies the other will continue to receive payment from the annuities.

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