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Fixed Annuity

What is a Fixed Annuity?

An annuity is a contract issued by an insurance company which guarantees a specific rate of interest for a specific term. Annuities may offer income tax and interest rate advantages over other saving vehicles like CDs and money market accounts. Historically, fixed annuities have credited competitive rates of interest.

Benefits of a Fixed Annuity

No Investment Risk – When purchasing a Fixed Annuity it is important to note that the insurance company providing the contract accepts 100% of the investment risk. Often, the insurance company guarantees a stipulated rate of interest for a specific term, usually 1,3,5,7 or 10 years.

Tax Deferred Growth – Fixed annuities are similar to IRAs and other retirement accounts in that they offer tax-deferred growth. This is an important advantage that other safe savings vehicles may not offer.

Fixed Annuity vs. Certificate of Deposit
When considering whether to place money in a Certificate of Deposit (CD) or a Fixed Annuity (FA), it is very important to consider your specific financial situation. Each of these investments has distinct features which may or may not be appropriate for every investor. When making your choices, you should consider the length of time you have to invest, the amount of risk you can assume, and the rate of return you will receive. The following comparisons of each option may be helpful.

Features FA CD
Free from stock market risk? Yes Yes
Able to make additional payments to the same account? Yes No
Social Security tax liability minimized or eliminated? Yes No
Penalty free withdrawals? Yes No
Funds not reduced by commissions? Yes Yes
Funds not reduced by commissions? Yes No
Able to provide lifetime income with tax benefits? Yes No