A Short Guide To The Fixed Annuity
The fixed annuity is similar in many ways to CDs issued by a bank
, but the difference is that they are intended to fund the buyer's retirement. These are for the most part very low in risk and can be converted to cash much easier than a typical CD as well. Their earnings may be deferred for tax purposes and they will generally provide a higher yield than CDs or bonds. They can be classified as either immediate or deferred. The former begins making payments immediately until the interest and premium is spent and the latter does not begin making payments until the end of the term agreed upon.
A fixed annuity will typically feature the following:
* One single upfront premium.
* The contract will lock onto one guaranteed interest rate for a certain number of years, just like a CD. * Offer a low risk because the money invested can only be lost in cases where the issuing financial institution becomes insolvent.
* Are the perfect solution for generating a solid income for retirement.
* Offer pretty solid returns for their low risk.
* Are offered for either short, medium, or long term durations, with the longer terms offering higher yields.
* Incredibly easy to use and feature no hassles. Simply sign the contact and make the required premium in order to start collecting.
Unless you terminate your fixed annuity contract early you can expect to receive a guaranteed investment with plenty of opportunity for growth. When these annuities are deferred you can expect the tax-deferral to compound as well which will earn you much more than a CD or money market account. In addition to receiving a steady income for life, you can count on receiving allowances for withdrawal without penalties, death benefits, and probate insurance.
These annuities are the perfect investment for anyone who is interested in finding a low risk investment; particularly those who have just retired and are looking for a way to protect their retirement fund from the volatility of the market. Although one does not stand the same high rate of return as the variable alternative provides, they will provide a steady stream of income with very little risk. However, it is good to keep in mind that successful annuities will include more than one investment, so diversification is key.
If you are searching for the best fixed annuity, you will have the best chances of getting a great rate if you shop when the interest rates are high. It would be best to find an excellent financial advisor who can help with adding annuities financial portfolio.
by: Lisa Cintron
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