CandleFocus Glossary Editor
Fixed annuities are a type of insurance contract that are designed to provide an investor with regular, guaranteed income throughout retirement. They are an attractive option for those seeking a reliable income stream, as they provide a reliable rate of return without the risk of the volatile stock market.
A fixed annuity is basically an account with a fixed rate of interest that is paid on contributions made to it. The investor will receive regular payments either directly or through a financial advisor in order to build up the value of their account over the long term. This structure allows for a more reliable and consistent growth of your money over time, as opposed to the fluctuations associated with stock market investments.
The earnings on a fixed annuity accumulate tax-deferred until the investor begins to take income from it. The earnings in a fixed annuity are not subject to capital gains taxes, providing further incentive for long-term growth. There is also typically a penalty for early withdrawal, so the investor is encouraged to allow the money to remain invested for the long run.
The amount of annuity payments due to the investor or their designated beneficiary varies depending on the annuity term chosen. There are two main types of fixed annuities- immediate annuities and deferred annuities. An immediate annuity will begin payments shortly after the initial investment is completed. This is ideal for those needing income shortly, for example retirees who are looking for a reliable income stream. Meanwhile, a deferred annuity will begin payments at a later date, usually at retirement age. Deferred annuities are beneficial for those looking for a secure retirement income option and are willing to take on the risk associated with long-term investing.
A fixed annuity can provide a strong income source in retirement, secure from the volatility of the stock market. They are tax-deferred, allowing for investments to grow without the threat of capital gains taxes. They are also useful if you need to access capital early on, letting you do so without suffering draconian penalties. All in all, a fixed annuity is an attractive option for long-term investors who need security and reliability in their retirement planning.
A fixed annuity is basically an account with a fixed rate of interest that is paid on contributions made to it. The investor will receive regular payments either directly or through a financial advisor in order to build up the value of their account over the long term. This structure allows for a more reliable and consistent growth of your money over time, as opposed to the fluctuations associated with stock market investments.
The earnings on a fixed annuity accumulate tax-deferred until the investor begins to take income from it. The earnings in a fixed annuity are not subject to capital gains taxes, providing further incentive for long-term growth. There is also typically a penalty for early withdrawal, so the investor is encouraged to allow the money to remain invested for the long run.
The amount of annuity payments due to the investor or their designated beneficiary varies depending on the annuity term chosen. There are two main types of fixed annuities- immediate annuities and deferred annuities. An immediate annuity will begin payments shortly after the initial investment is completed. This is ideal for those needing income shortly, for example retirees who are looking for a reliable income stream. Meanwhile, a deferred annuity will begin payments at a later date, usually at retirement age. Deferred annuities are beneficial for those looking for a secure retirement income option and are willing to take on the risk associated with long-term investing.
A fixed annuity can provide a strong income source in retirement, secure from the volatility of the stock market. They are tax-deferred, allowing for investments to grow without the threat of capital gains taxes. They are also useful if you need to access capital early on, letting you do so without suffering draconian penalties. All in all, a fixed annuity is an attractive option for long-term investors who need security and reliability in their retirement planning.