A fixed rate annuity is basically an insurance contract wherein the insurance company agrees to pay you a fixed monthly income for life in exchange for a one-time lump sum premium (see Annuities Explained for a more detailed explanation). These annuities are generally used by individuals who are looking to fund their retirement without risking principal. Fixed annuities offers protection of your investment at a guaranteed fixed rate of return, generally somewhere between 3% and 10% (depending on the options you choose). It is important to comparison shop for your immediate annuity online before buying to make sure you’re getting the best deal possible.
The rate on interest you receive is most often determined by the length of time you contract for and by the amount of money in your initial investment. You can either make one lump sum investment or make an initial investment and then add to it later on. There are no limits as to the amount you can invest, which makes it attractive to many people. You also will not pay taxes on what you make until you receive payments from the account.
When setting up a fixed rate annuity you have the option to choose between receiving immediate payments or deferring them for a set length of time. You will make more interest, generally if you defer them. If you have already retired you may need to do the immediate payments, but if you have not it will be more advantageous for you to defer until your retirement.
People who invest into fixed indexed annuities enjoy a no hassle investment plan. They simply set up the account, pay into it and when it is time start receiving payments. Payments are most often dispersed monthly and are dispersed either for a set time period or in some cases for the life of the owner of the account. You will want to be careful to select a plan that will allow you to add on a beneficiary in case of your premature death.
Comments are closed.