Fixed Annuity
A fixed annuity is a type of insurance product that provides a guaranteed return on investment and regular income payments over a specified period or for the lifetime of the annuitant. Fixed annuities are designed to protect against market fluctuations, offering stability and predictable income.
Key features of fixed annuities include:
- Guaranteed Interest Rate: The insurance company guarantees a minimum Interest Rate on the investment.
- Tax-Deferred Growth: Earnings grow tax-deferred until withdrawal, allowing for potentially greater accumulation over time.
- Regular Payments: Annuity holders can choose to receive payments on a fixed schedule, such as monthly, quarterly, or annually.
- Principal Protection: The initial investment is typically protected, meaning the holder cannot lose their principal due to market downturns.
Examples of fixed annuities include:
- A retiree invests $100,000 in a fixed annuity that guarantees a 3% annual Interest Rate, leading to predictable growth over time.
- A couple purchases a joint fixed annuity that provides monthly income for both spouses until the last surviving spouse passes away.
Common use cases for fixed annuities are:
- Individuals seeking stable retirement income without exposure to Stock Market Volatility.
- People looking to save for future expenses, such as healthcare or long-term care, with the assurance of guaranteed Returns.