How Does Fixed Annuity Work?

To understand how a fixed annuity works, you must first understand what a fixed annuity actually is. A fixed annuity is a financial product that guarantees a specific rate of return and provides a steady stream of income during retirement.

With a set annuity, the investor knows exactly how much the annuity will grow and exactly how much it will pay out in the form of income during retirement.

Besides being a steady flow of income during retirement, a fixed annuity value will increase over time, simply based on a fixed interest rate. This is different from a variable annuity which earns or loses value based on how the market is performing.

An additional benefits are the earnings are tax-deferred. Meaning, when you receive income payments, that is when the money is subject to income tax. Taxes aren’t taken out while the annuity is growing, leaving more money to earn a return.

Payments on a your annuity are guaranteed, as an ongoing income stream, during retirement. Because of a fixed annuity’s value grows at a set interest rate, rather than based on market values. When the market is down, you won’t lose anything; same for when the market is up, you won’t gain more. The fixed annuity is steady and not dependent on market fluctuations.

A fixed annuity typically offers a standard death benefit. This is money paid to your beneficiaries if you pass away before the annuity begins paying out. This optional death benefit may require a policy rider that may be at an additional cost.

Want to know more call Advanced Insurance Concepts today and Jim Rooney will work with you to find the answer.