Fixed Annuities
Fixed annuities are commonly used in retirement planning as they are insurance contracts that pay a guaranteed amount of interest rate towards the contributions made on the account by the owner.
How Fixed Annuities Work
The annuity owner can choose to either make a lump-sum payment or contribute a series of payments to the insurance company. The insurance company will then guarantee the specified amount of interest that will be earned on the account, also known as the accumulation phase.
Once the annuity owner decides to receive the payments in return, the insurer will calculate the payments based on how much is in the account, how long the payments will last, and other factors. This is known as the payout phase. The annuity owner can choose whether they want the payments to be paid out for a specific period of time or for the rest of their life.
Pros and Cons of Fixed Annuities
here are several pros and cons of fixed annuities. The pros include:
- Guaranteed rates and payments
- Tax-deferred growth
- Investment returns
- Safety of principal
Cons of fixed annuities include:
- Allow only one withdrawal per year
- High fees
- During the surrender period (amount of time an investor must wait to make a withdrawal), there can be a surrender charge. If you are under 59 ½ years old, there is a possibility you could pay a 10% tax penalty on top of that.
We're Here to Help!
Advanced Insurance Concepts Is Here to Help
If you are interested in an annuity and feel that a fixed annuity is the route you would like to take, reach out to Advanced Insurance Concepts today. We can walk you through the different types of annuities and help you determine if this is the right choice for you. Give us a call 816-476-8191.