A fixed annuity is an insurance contract that guarantees the insurer will pay the purchaser a guaranteed, fixed interest rate on their contributions to the annuity for a specific period of time. Fixed annuities are low risk contracts and can provide a steady stream of income in retirement.
A fixed annuity can be immediate or deferred. That is, depending on your contract, you may start receiving annuity payments within a year of purchasing your fixed annuity or you may have the payments start at a later time. Deferred annuities typically start payments at retirement.
Tax Deferred Growth - Allow your initial investment to grow tax-free, then only pay taxes on income you actually receive
Fixed Rate of Return - Have peace of mind and eliminate market uncertainty knowing exactly what your money is earning
Access Your Money - Choose from several options for partial withdrawals or conversions to income payments, subject to taxes and surrender charges
Optional Benefit Rider - Choose the optional Lifetime Income Rider to guarantee you never outlive your income. Receive guaranteed income for life even when your annuity value is zero.
Are complex financial instruments that have characteristics of both fixed and variable annuities. Indexed annuities offer a minimum guaranteed interest rate combined with an interest rate linked to a market index, hence the name.
Many indexed annuities are based on broad, well-known indexes like the S&P 500 Composite Stock Price Index. But some use other indexes, including those that represent other segments of the market.
Gains can be limited
With this type of annuity, gains can be limited by elements such as participation, caps and interest. However, this product does have some protection from down markets.
Complexity of plans
The jargon for fixed indexed annuities can be tough to understand, so your financial professional can guide you. The following can help:
An indexed annuity pays a rate of interest based on a particular market index, such as the S&P 500.
Indexed annuities give buyers an opportunity to benefit when the financial markets perform well, unlike fixed annuities, which pay a set interest rate regardless.
However, certain provisions in these contracts can limit the potential upside to only a portion of the market's rise.
While FIAs are generally considered conservatives—and make a selling point of their guaranteed return—they nonetheless carry risks. One is if you need to get out of the contract early because of a financial emergency or other pressing need.
