What is a fixed annuity?

A popular retirement savings vehicle that was created for long-term investors, a fixed annuity earns a steady rate of return. There is an accumulation phase during which funds accrue interest, and then a payout that is deferred until a maturity date. It’s like a bank CD or savings account, except it is offered by an insurance company. You deposit an initial lump-sum and the insurer provides a guaranteed return after a fixed period of time without risk that you will lose your principal.

Why choose a fixed annuity over a CD?

While a fixed annuity provides steady, guaranteed, and worry-free growth, another major advantage is tax-deferral. While the interest on a CD is taxed yearly, a fixed annuity lets you defer all tax on earnings until withdrawal.

Fixed annuity interest rates usually exceed rates available on bank CDs. A fixed annuity also offers other significant benefits that a bank CD cannot match:

Why consider a fixed annuity?

• Guarantees. Avoid the volatility of the stock market by protecting your money in a fixed annuity that offers a specific rate of return—a particularly important advantage if you are nearing or are in retirement.
• Tax deferral. With a tax-deferred fixed annuity, your money can grow faster than it would with other financial products.
• No limit on contributions. Unlike a 401(k) or IRA, there are no limits on the amount you can deposit into a fixed annuity.

With a fixed annuity, you can:

• Lock in a competitive rate for the period of time that fits your needs.
• Rest easy. Knowing your money is safe. Your investment is guaranteed by the assets of the life insurance company, which is licensed and regulated by the states in which it does business. As legal reserve insurance companies, insurers are required by state regulation to maintain reserves equal to or greater than guaranteed surrender values. Click here for more information on the underwriters and their financial strength ratings.
• Conveniently access some of your money each year. A fixed annuity is designed for long-term accumulation, but if you need to access some of your money, you can make specified withdrawals, without incurring a surrender charge. For unexpected life events like hospital or nursing home confinement, you can access all of your money, without surrender charges.
• Control your taxes. Tax deferral, combined with access to your money through partial withdrawals, provides you with control. You select when to take income and therefore when to pay taxes. When your guarantee period ends, a fixed annuity can be rolled over into a new annuity at prevailing interest rates, with no tax liability incurred. Many individuals are in lower tax brackets when their money is finally withdrawn.

Further Questions?

For current rates and additional information, or if you simply have questions, please contact Meyer and Associates’ Advisory Services at AdvisoryServices@meyerandassoc.com or 800-635-7801, without obligation.