What are Fixed Annuities?

Fixed annuities provide a guaranteed minimum interest rate and are considered savings instruments. Insurance companies issue all fixed annuities. They are not government or bank obligations, so naturally they are not FDIC insured. However, fixed annuities have an extraordinary record of safety and offer other benefits.

​Prior to the late 1970s annuities were primarily used as a retirement income vehicle. The textbook definition of an annuity in those days was “A periodic income for a specified length of time, for life, or a combination of the two.”  Today, however, annuities can mean much more.

Main Annuity Benefits:

  • A means of accumulating interest on a tax advantaged basis.
  • An estate instrument that preserves and protects assets.
  • A guaranteed income for life that also lets you access the principal.
  • ​Safety of principal.

Tax Advantages

Money remaining inside an annuity grows without being taxed until withdrawn. Unlike qualified retirement accounts where you must begin taking out money around age 70, most annuity contracts permit the owner to enjoy the advantage of tax deferral until age 85, 90 or even later. Tax deferred does not mean tax-free; interest is taxed when withdrawn. Also, the Treasury Department charges a 10% penalty on interest, in addition to regular taxes, if withdrawals are made before age 59 1/2. ​

Learn about the CD Alternative...
the Multi-Year Guaranteed Annuity (MYGA)

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More Income Topics

Resources

CONSUMER'S GUIDE:
​How to Generate Lifetime Income with Fixed Annuities

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