Fixed Annuities

There are very few guarantees when it comes to investing. But when you’re planning for the long term, that might be exactly what you want. With a fixed annuity, you’ll always know what your money is earning—even in a rocky economy.

The Details

Here’s what you need to know about fixed annuities. The money you put in gets you a guaranteed rate of return for a certain period of time.
Since an annuity is issued by an insurance company, they handle all the investment decisions. They’ll pay you the interest rate they promised, no matter how the investments perform.

Remember, one benefit of an annuity is a steady stream of income. And since the rate is guaranteed and fixed, you’ll know exactly what your income is going to be, which can be a huge relief.

(If you still want some growth potential but don’t want to give up the guarantee, you might want to look into an variable annuity.)

Why They're a Good Idea

Fixed annuities can be a great solution for people looking for guaranteed income later in life.

• They offer a guaranteed rate of return on your investment.
• The money earned by the annuity won’t be taxed until you start receiving payments.
• If you need to access your money early, you can typically withdraw up to a certain amount each year without paying a fee.
• They let your money grow faster by having deferred taxes.

An annuity can also help make things easier for your spouse or children if you die. Usually, your estate would have to go through a legal process before your beneficiaries can access it. With an annuity, they won’t have to wait.

If this happens before you start receiving annuity payments, your beneficiary will get a “death benefit” that usually equals the total value of the annuity. If you’ve already started to receive payments, the remaining guaranteed payments will go directly to your beneficiary.

Factors to Consider

There are several types of annuities out there, but choosing one isn't too hard. A fixed annuity could be just what you're looking for if:

• You want the security of principal protection and guaranteed rates.
• You're concerned about outliving your money.
• You're changing jobs or retiring.
• You don't want to manage large amounts of money on your own.
• You make sure your spouse or children are taken care of financially.

Common Questions

Why is tax-deferral important?
Tax-deferral means you won’t pay taxes on the money earned by your annuity until you start getting payments. If you’re in a lower income-tax bracket when you start getting payments from your annuity, you’ll pay less marginal income tax on the money you earn.

What is the “guarantee period”?
Your fixed annuity offers a guaranteed rate for a certain period of time, which you choose when you buy it. If you still want a guarantee when that period is up, you can renew at a new rate. Renewal rates work differently for different products, so talk with your financial professional to make sure you understand what your renewal rate will be.

4AFS