Fixed Annuities are the easiest annuity to understand. It works similar to a Certificate of Deposit. You purchase this annuity from an insurance company that pays you a % for a guaranteed amount of years. These annuities are also referred to as
5% for 5 years. After the 5 years is over, you can either continue with the same carrier with a new interest rate or you can have the option of moving that money to a new carrier with a new rate.
Make sure your insurance company allows you to roll all of your money after the surrender period is over. There are a few companies that make it difficult if not impossible to move your money after you complete the guaranteed period.
A Fixed Annuity annuity will work great for people who want to know exactly what rate of return they are getting. These people like having zero exposure to market risk to their principal. These annuities also provide for interest only withdrawals and some have the ability to withdraw up to 10% of the accumulated value each policy year.
You cannot do that with a CD.
These Annuities pay a fixed guaranteed rate of return.
No exposure to market’s ups and downs.
Low min. investment of $2,000 to $15,000.
Liquid. You can take interest and up to 10% free withdrawals a year on some contracts.
You are locked into a rate. If rates go up, you have to wait to move your money into a new contract.
If you need to surrender the policy early, you will pay a surrender fee. As long as you play the game, you will not be penalized.
Are These Annuities Right for Me?
If you watch the news at night and you are worried about your money, these annuities will help you sleep at night. It works just like a CD but with the tax deferral. The Best Annuity is the one that will fit your needs. If you want to make sure your money is there to get you through retirement, an annuity that is fixed is for you.