Fixed Annuities

Fixed Annuities:

In our current economic environment, many people have found that they do not have the tolerance for market risk that they once thought that they had.  An option that many people have found attractive is a fixed annuity.

What is a fixed annuity?

A fixed annuity is a product of an insurance company.  It is a contract between you and the insurance company.  By design, it is intended to help one grow their assets, and provide options to create a guaranteed income for a specified number of years, or for the rest of their life.  When one purchases a fixed annuity, they are permitting the insurance company to decide how their money is used.  In exchange, the insurance company will provide a guaranteed rate of return for 1, 3, 5, 7 years, or possibly some other length of time. 1

The assets within a fixed annuity grow tax-deferred.  This means that you do not pay taxes on the growth of the assets until you withdraw them at some point down the road.  (Please note that withdrawals may be taxable, and that a 10% IRS penalty may be assessed on the amount withdrawn if you are under the age of 59 ½).

Deciding which company and contract to select is where we can help.  We will shop the marketplace of available products with a view to finding quality choices for our clients.  When considering the options available, we give strong consideration to the financial strength and well-being of the company issuing the contract.  As well, we evaluate all available options for the best rates of return.  Some contracts will offer a guaranteed rate for a period of time, then a new rate each year.  Some companies will offer contracts which have a guaranteed rate for the life of the contract. 1

What features are available with fixed annuities?

Fixed annuities, in addition to the usually-available guaranteed rate of return, offer the option to annuitize.  When exercising this feature, the annuitant (you) allows the insurance company to use the asset to create a guaranteed stream of income.  This income lasts for a specified amount of time, or, for the rest of one’s life.  The amount of income that the annuitant will receive is actuarially determined and is dependent on life expectancy.1

Feel free to contact us regarding fixed annuities.  We will talk with you about your objectives, your tolerance for risk and all of your options, and help you to decide whether a fixed annuity is a good option for you to consider.

1. Guarantees are subject to the claims-paying ability of the issuer.