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Fixed Annuity


Fixed Annuity Information

What is a fixed annuity?

A fixed annuity is a contract between you, the annuitant, and an insurance company, the annuity issuer. This is a long-term investment in which you pay after-tax funds to the annuity issuer, who then invests your principal and pays you or your beneficiary back with earnings. With a fixed annuity, you earn a guaranteed interest rate (subject to the claims-paying ability of the issuer) on your investment.

Unlike other investment plans, there is no limit to how much you can invest in an annuity. Your funds will steadily grow with a tax-deferred status, and you pay your regular tax income rate on only your earnings upon withdrawal. A 10 percent tax penalty may be charged if you withdraw from your annuity before the age of 59½.

The two phases of a fixed annuity include the following:

  • Accumulation: This is when you add money to your annuity, whether you pay in a lump sum or you make a series of payments. You can continue to let your account grow tax-deferred for an indefinite amount of time.
  • Distribution: This is when you begin withdrawing money for your annuity at age 59½, whether you take out lump sums or you annuitize to supplement your retirement finances with a regular stream of income for life. Early withdrawals may be subject to a penalty fee.    

Why buy a fixed annuity?

Fixed annuities are popular choices for individuals who want a supplemental income that they cannot outlive. Your principal investment and predetermined interest rate are both guaranteed. This limits the risk exposure on your hard-earned money.

Consider these benefits of fixed annuities:

  • The lifelong income stream a fixed annuity supplies will supplement the income you receive from Social Security, pension plans and other employer-sponsored retirement plans that have contribution limits.
  • The annuity funds can be used to maintain your financial independence in the event of your need for long-term health care.
  • Besides caring for your own needs, this investment can go toward providing a monetary legacy for your children.
  • If funds are to be given to a beneficiary, money from a fixed annuity will be paid directly and will not be subjected to the probate process.

Contact us to learn more about protecting your future with a fixed annuity. We are happy to answer your questions and help start your investment process today.


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