The Fixed Deferred Annuity Details
The fixed deferred annuity is the second type of fixed annuity contract that you will come in contact with. As we stated earlier, the annuities will either be immediate or deferred. There is really no other option. If you are looking for immediate payments based off of a one-time premium, then the immediate fixed annuity is probably your best options. Most of the time however, your fixed annuity contract will be a fixed deferred annuity.
The primary distinction that needs to be made with this sort of contract is the deferred portion. A deferred fixed annuity is simply an annuity contract that defers distributions to the beneficiary until a date into the future. This delay can help to facilitate additional growth or savings in the account, preserve capital until it is needed, or delay distributions until the owner reaches a certain retirement age.
The most common period in which to defer payments on this type of deferred annuity contract is until the individual reaches age 59 ½. Payments are generally scheduled to be made over the period of accumulation, and will continue to build interest inside of the account. Most contracts will offer some form of guaranteed growth rate, though this is most common on fixed rate annuity.
Either way, the guaranteed distributions will begin upon the date determined at the start of the contract date. The annuity owner determines what date the insurance company will begin making distributions at the creation of the contract, and agrees to make the necessary premium payments before that date. The actual distribution out of the account will depend on the nature of the account somewhat, and may include some form of additional bonus payments onto the fixed portion of the account.
Fixed deferred annuity contract can be an excellent retirement planning tool if used correctly. They can facilitate tax-deferred growth during the accumulations phase of the account, and delay distributions until they are needed by the retiree. A tiered annuity plan can be established to ensure the investor with continued payments for the duration of their retirement years.