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Understand How Fixed Annuities Work

By Edited Nov 13, 2013 1 0

Fixed Annuity Advantages

If you are trying to reach the financial goal of having a guaranteed income for your retirement years, you may have already been introduced to fixed annuities. These products may provide you the income you need from the cash you can use to seed your account.

What Are Fixed Annuities?

A single premium immediate annuity, also called an SPIA, expects you to begin with one lump sum payment. A deferred annuity, on the ther hand, lets the owner build up the cash account over time. Either type of fixed product lets you enjoy guaranteed returns and a pretty safe place to stash your cash!

These products are sold by life insurance companies, so you are backed by the good financial standing of the insurer you choose. Contracts, for fixed annuity products, will guarantee a minimum rate of return so you do not risk using your capital.

Which Type of Annuity Is Best?

The right choice will depend upon the position you are in. If your retirement is coming up right away, and you already have the cash to invest, you will be directed towards immediate products. If you are still working on your assets, you will probably consider a deferred product. It is usually that simple!

Beyond the basic contract types, you find a variety of different products and different companies. It is important to look at the details to see which product and insurer will serve you best. The rate of return, the amount of money you have to contribute, and many other factors will impact your final decision. It may be helpful to sit down with a qualified annuity agent before you make a final decision.

Are Annuities The Best Solution?

Of course, you do not have to buy an annuity contract at all. Your other investment choices may include selections as diverse as bank savings accounts to stocks! These days, bank products are not providing high returns. Stocks can be risky. You need to choose the right solution for yourself. You may even be better off if you mix up your choices, and do not rely upon one retirement vehicle.

Also note that most people consider annuities to be long term solutions. If you think there is a chance you will have to withdraw your principle, you risk losing some of your money to surrender charges.




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