The Basics Of Fixed Annuities
An annuity is a simple and relatively safe way to create a retirement savings
fund. Annuities come in a wide variety of types, and fixed annuities are
among the most popular for their simplicity. A fixed annuity requires a onetime
premium payment, which is a large lump sum and is locked in at an
interest rate determined at the time of payment. The annuity can then
provide retirement income from the interest earned at a later date.
Why A Fixed Annuity?
Annuities are a popular choice for retirement investment because they carry
little to no risk and have a nearly guaranteed return. You will make a onetime
premium payment and have a guaranteed interest rate; nothing will
change and your return is safe. You can set up a lifetime annuity payment
that will provide you with a secure source of retirement income for as long as
you live. Because it is a fixed annuity, the amount of each payment is
predetermined and guaranteed, so you can depend on it each month.
A fixed annuity is tax-deferred and allows you to gift or bequeath money to
family and friends tax- and probate-free. You can buy as many annuities as
you would like, each one with the same single premium payment and each
with a guaranteed rate of interest growth.
Buying A Fixed Annuity
Fixed annuities are sold by your insurance agent and although they are an
investment, they are also an insurance policy. Your insurance agent can
provide you with information on the fixed annuities available to you,
including the interest rates and the types that are offered. The two main
types are immediate and deferred fixed annuities, but you can also invest in
CD style annuities, which are in fact a blend of an annuity and a CD.
Once you choose your fixed annuity, you make the premium payment and
the terms of the policy are in force. There is nothing more you need to do,
and no further investment to make. If you want to invest more money, you
can simply purchase more annuities whenever you are ready.
Fixed annuities are an easy and safe way to guarantee a specified income
amount for your retirement years. Because the interest rate is locked in, the
premium is predetermined, and the payment amount is fixed, you can rely
on this investment to remain steady and provide you with an income for a
specified term or even for life.