Fixed annuity Products. What they are and how they work.

A fixed annuity contract is a retirement tool in which the insurer agrees to make periodic payments to you, beginning either immediately or at some future date while offering a guaranteed minimum interest rate on your purchase payment(s) for a certain period of time.

What are the benefits of purchasing a fixed annuity?

A fixed annuity can be an important financial tool for your retirement plans. Here’s why:

Fixed Annuity Types

• Income annuity – An immediate annuity is purchased with a one-time payment and provides an immediate stream of income for a specified period of time.
• Deferred annuity – With a deferred annuity, payments are made over time for a long term goal, such as retirement. Over the years, your money has the potential to accumulate tax deferred. Withdrawals providing an income stream begin in later years.

Who needs a fixed annuity?

A fixed annuity might be right for you if you are looking for a way to protect your principal and receive a guaranteed rate of return.

There are two phases to a fixed annuity: accumulation (pay in) and annuitization (pay out).

• Accumulation – Pay in – During the accumulation phase of your annuity, you accumulate interest on the contract based on your purchase payment amount and the rate guarantee period you selected.
• Annuitization – Pay out – Payments may be either level or increasing periodic payments, and may be set up for either a set amount of years or for the life of one or two people. When it’s time to begin receiving income, you make the choices depending on what your needs are at the time.

Learn about a Fixed Annuity

Perhaps you are considering getting a fixed annuity but you want to know a little bit more information about what they consist of and exactly how they work prior to you going ahead? There are many different ways to invest your capital. The stock exchange and other ways such as mutual funds usually are not an ideal solution for many people, so they decide to make an investment in a different market. First you need to understand how a fixed annuity  works in order for you to make your mind up if it is the right one for you.

What fixed annuity means

Firstly you need to understand exactly what the term fixed annuity means. In basic terms they can be considered to be a contract between you and an insurance company. You essentially entrust them with your money to look after and they agree to give you a financial return on your initial investment in exchange. The meaning of this is that you have a return that is guaranteed on your investment and do not need to stress about losing money, even if the company loses the money that was turned over by you as an investment.

Types of Fixed Annuity Products

There are various different kinds of fixed annuities and it’s important to understand them all before you decide where to invest your capital. The amount of money you receive in your return will depend on the particular kind of fixed income type annuity you choose to make an investment in. One type gives a set number of payments and another type gives payments throughout your whole lifetime.

Immediate Fixed Annuity

One type of annuity is the immediate fixed annuity. With this type you make your investment as a lump sum and then receive regular payments. After deciding to make an investment in this kind of annuity, you do not have access to your money that you originally invested any more. Instead of this, you can choose your own payment terms – i.e. what kind of payments you want to receive. After deciding to invest your money and selecting your payment terms, the regular payments will stay the same. This means that your payments will not increase with inflation so you need to pay careful attention to the rates of the fixed annuity at the time you choose to make your investment.

Deferred Fixed Annuity

One more type of annuity to possibly invest in is the deferred fixed annuity. This kind of annuity is an initial investment that is made with a promised return on the investment at a later date. There are different timescales for length of investment and frequently you are charged a penalty if you choose to withdraw the money early. Most insurance companies however, allow you to access up to 10% of your investment every year without having to pay any penalties.

Many people decide to invest in some type of fixed annuity as it is safer than other forms of investment. You could choose to either trade in your investment money immediately for a set number of payments or alternatively you could store the money in the form of annuities in order to receive a return on the investment at a later date. It is important to consider all the options carefully before investing any money so that you are sure of which type of financial planning investment will be the best for you.

What are Types of Annuity Products?

Are Annuity Products a Good Fit for Me?

Annuity products sold by financial institutions are designed to assist an individual in saving for retirement and then, upon retirement, provide the owner with a guaranteed stream of income.  As a result, annuity products one of the best financial instruments  for an individual during their retirement years.

A major selling point for annuity products is the fact that they are tax-deferred until they are withdrawn, usually at retirement, at which point, the income is taxed. You can structure these instruments so that you receive income in a number of ways, from guaranteed payments for as long as you live, to a set income for a number of years. For the right investor,  annuity products can be an instrumental part of their retirement plan.

Annuity Products may assist you to:

• Receive  income payments in retirement for as long as you live
• Provide beneficiaries with a benefit at death
• Provide a means of diversifying your investments
• Provides growth on a tax-deferred basis
• Guarantee that you won’t outlive your savings

Common Annuity Products