Who Should Consider Fixed Annuities?

Annuities are insurance contracts wherein the individual is promised capital gains by paying the insurance company premium or premiums. There are different types of annuities that offer people a variety of options in the manner in which they can invest their money. Fixed annuities are annuities that guarantee the principal amount and offer a fixed rate of interest for a period of time, after which it may be revised. Fixed annuities may be purchased by either making a one-time lump sum payment or distributing that amount into a series of payments over a period of time.

Features of Fixed Annuities

Fixed annuities offer a fixed rate of interest on the guaranteed principal amount. The rate of interest is higher than that of other conservative investment options such as CDs.
Fixed annuities are tax-deferred, which basically means that the tax is not levied on the gains from the investment until you are ready to receive payments from the annuities. Thus the investor earns extra interest on the money they would have otherwise been spending on taxes.
A fixed annuity is a secure investment as the principal amount is guaranteed by the insurance company and also by the State Insurance Guarantee Fund.
There are several payment options that fixed annuities offer their investors and these include lifetime payments. This is an ideal option to consider for a retirement plan.
The equity-indexed fixed annuity is a type of fixed annuity that has the basic features of a fixed annuity but also provides investors the chance to benefit from the superior performance of the stock market. The equity-indexed fixed annuity is like a hybrid that allows investors to gain from the highs of the stock market but protects their investment against the lows or falls in the index.

Who Should Consider Fixed Annuities?

Fixed annuities are essentially for the conservative investor who wishes to know that the principal amount paid is guaranteed and the rate of interest is steady. This type of annuity is ideal for those who don’t want to take any risks with their money and is a great option for individuals who are looking to create a safe retirement nest egg for themselves.

People who have a large chunk of money to invest or those who wish to systematically contribute to a fixed annuity can invest into fixed annuities. The flexible re-payment options allow the investor to receive the income from the fixed annuities in a manner suitable to them. People who wish to benefit from the tax deferral aspect of this investment may also consider fixed annuities. In cases where the fixed annuity is held jointly, in the event of the death of one partner the other will continue to receive income from the fixed annuity. Thus it is a good option for a couple to consider as a joint retirement plan. There are different types of fixed annuities such as the immediate fixed annuity that provides a regular income virtually immediately after the investment is made. The equity-indexed fixed annuity is for investors who want to gain from the stock market and yet be assured of their investment and the rate of interest it earns.

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