Your comprehensive guide to Annuities

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Fixed annuities are a popular financial product for individuals seeking stable and predictable retirement income. If you're considering fixed annuities but have questions, this guide provides answers to some frequently asked questions:

1. What is a fixed annuity?

A fixed annuity is a type of annuity contract purchased from an insurance company that guarantees a fixed rate of return on your investment. It provides a predictable stream of income over a specified period or for the rest of your life, depending on the terms of the contract.

2. How does a fixed annuity work?

When you purchase a fixed annuity, you make a lump-sum payment or a series of payments to the insurance company. In return, the insurance company promises to pay you a fixed rate of interest on your investment, typically on a monthly basis. The interest earned is tax-deferred until withdrawn.

3. What are the benefits of a fixed annuity?

Fixed annuities offer several benefits, including:

• Guaranteed income: Fixed annuities provide a predictable stream of income, helping to ensure financial stability during retirement.
• Principal protection: Your initial investment in a fixed annuity is protected from market fluctuations, providing peace of mind in volatile economic conditions.
• Tax-deferred growth: The interest earned on your fixed annuity grows tax-deferred until withdrawn, allowing your savings to compound over time.
• Flexible payout options: Fixed annuities offer various payout options, including lifetime income, fixed-period payments, or a lump-sum withdrawal, allowing you to tailor your income stream to your needs.

4. Are there any drawbacks to fixed annuities?

While fixed annuities offer many benefits, there are some potential drawbacks to consider, including:

• Limited growth potential: The fixed interest rate offered by fixed annuities may not keep pace with inflation, potentially reducing the purchasing power of your income over time.
• Surrender charges: Fixed annuities often impose surrender charges if you withdraw funds from the contract before a specified period, which can limit liquidity.
• Tax implications: Withdrawals from fixed annuities are subject to ordinary income tax, and withdrawals made before age 59½ may be subject to a 10% early withdrawal penalty.

5. Who should consider a fixed annuity?

Fixed annuities may be suitable for individuals who:

• Seek stable and predictable retirement income.
• Want to protect their principal from market volatility.
• Have a low risk tolerance and prioritize capital preservation.
• Are looking to supplement other retirement income sources, such as Social Security or pensions.

In conclusion, fixed annuities offer a secure and reliable source of retirement income, providing peace of mind and financial stability during your golden years. By understanding the basics of fixed annuities and considering your specific circumstances and needs, you can make informed decisions to safeguard your financial future. 

How do I purchase a fixed annuity?

Get in touch with us and one of our experts will assess your retirement income needs, compare annuity products, and help you select the annuity contract that best fits your goals and objectives.