Fixed Term Annuity

Many options exist for retirement and long term investment. Some of these options have a potentially high rate of return but carry a significant level of risk, such as stocks. Others offer a fixed rate of return, typically somewhat low, but very little risk. A fixed term annuity falls into the latter category. To consider whether this is a good option, you must first understand what this investment vehicle is and how it works.

Simply put, fixed term annuities (FTAs) are contracts you have with an insurance company. You give them your funds to manage and in return, they agree to provide you with a certain amount of return on that money. This means that regardless of whether they gain or lose money with your funds, you will receive a fixed rate of return. Most FTAs are payable even after death, so your beneficiaries would receive the rest of the payments if you passed away.

There are two types of FTAs to choose from. One will give you a set number of payments, and another will give you payments throughout your lifetime. You can also choose an immediate fixed annuity, where you turn over your entire lump sum investment and then receive payments, or a deferred fixed annuity, where you choose a length of time for your money to be invested and then have access to it again at the end of that time. This is somewhat similar to a certificate of deposit (CD) from a bank, except that you are receiving regular payments from the annuity while it is invested, instead of at the end as with a CD. Insurance companies do typically allow you access to up to 10% of the investment in a deferred fixed annuity without penalty.

When choosing an annuity, the rating of the insurance company should be considered. Since you are giving them your money in exchange for this long term return, you need to be sure they will still be in business when it's time to collect. Ratings in the A (excellent) and A+ (superior) are what you are looking for and there are hundreds available in the United States. Terms for the annuity range from 1 year to 35 years, with 5 to 20 years being most typical. Fixed term annuity rates at the current time range from around 5-7% for a 10 year term.

What are the risks of an FTA? First, as mentioned, the insurance company could go out of business. Fixed annuities are not guaranteed by the FDIC like investments at a bank or financial institution. Annuities are in US dollars, so if the currency falls or fails, the investment could be lost. In addition, since early withdrawal is penalized, the annuity is not a liquid asset. After you have carefully considered the risks and benefits, many secure and trustworthy websites are available to help you select and purchase your FTA.

 

What Are Fixed Annuities?

Most people will at some point in their lives find themselves asking: what are fixed annuities? The reason this question is so common, is that it becomes quite difficult to plan for retirement without at least considering the possibility of implementing a fixed annuity in the planning process. Used correctly, this type of annuity can be a very powerful retirement tool.

Simple stated, fixed annuities are an insurance contract intended to provide a steady stream of income to the recipient for a specified period of time. To "annuitize" something is to break a single lump-sum of money into multiple payments. Annuities are most common from pension or 401k distributions, but can also be purchased directly with other funds.

One of the most appealing potential features of fixed annuities contracts is the ability to make them lifetime annuities. Adding the lifetime option to this insurance product allows the owner of the annuity the ability to receive payments for the duration of their life. As you have a 50/50 chance of living beyond your life expectancy, this added guarantee of not outliving your source of income is quite incentivizing.

In terms of performance, a fixed annuity is most often compared to a Certificate of Deposit (CD). The CD has long been trusted as a conservative and secure method of investment, and is favored by seniors for their lack of volatility. Similarly, fixed annuities provide the same sort of security, and are often preferable to a CD contract in a number of different ways.

Common types of fixed annuities are fixed rate annuities and fixed income annuities. These both provide the owner guarantees on payments and interest rates for their investment. For investors that prefer a little bit of involvement in the stock markets, an indexed fixed annuity is likely the best option. These allow participation in market upswings, but minimize the risk to the investor during market downturns. Many find these contracts to be the ideal combination of low risk and performance.

So what are fixed annuities? The short answer: an insurance contract comparable to a CD. The long answer requires a better understanding of how the annuity fits into your personal financial plan. Really the only way to see if an annuity works for you is to find out for yourself. Each person has different circumstances that will determine the rates, duration, and performance of the annuity product. Finding the right annuity quote will be important to determine your own personal suitability. Search this website, learn what you can, and then take action.

 

5 Tips For Finding The Best Fixed Annuities

The most effective way to find the best fixed annuities is by following these five basic principles.  These really shouldn't be mind-blowing concepts, but missing just one of them can make a significant difference in the type of contract you end up with.  Annuities are not created equal; nor are annuity companies.  You need to do your research before you commit to any one contract type.  Annuities are hard enough to get out of once you invest; you don't need the added pressure of buying a contract that doesn't make sense for your unique needs.

 

Fixed Rate Annuities – The Guide Before You Buy

Fixed rate annuities are among the safest types of annuity products available on the market. Although they don't address all of the risks associated with an annuity purchase, they certainly take care of one of the more concerning for potential investors. As the name implies, the fixed rate annuity provides the investor a fixed interest rate on their contract.

 

Fixed Index Annuity Allows Market Participation With Safety

Traditionally, annuity purchasers were restricted by one of two types of annuity purchase. This limited their choices to either a fixed annuity or a variable annuity. The fixed annuity has allowed stability and consistency in the market, and the variable annuity has allowed the more adventuresome investors the ability to participate in the markets with their annuity product. In the Mid 1990s a third option was introduced by insurance companies that combined the best attributes of both fixed and variable varieties. This product is known today as the fixed index annuity.

 

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