Benefits of Fixed Annuity

A fixed annuity is an investment vehicle that you can place your money in with earnings based on a guaranteed interest rate. Is this a good place to store your money in for your retirement? Let us examine its benefits.

An annuity is simply an agreement between an individual and an insurance company guaranteeing to pay a series of income payments in exchange for invested funds. With a number of annuity types available out there, the fixed annuity seems to provide the best option for people saving up for their retirement on the long term. This is because fixed annuities usually earn better rates of return that the other financial products available out there.

A fixed annuity also offers one of the safest and most secure vehicle to store your hard-earned money for your retirement. This is because the principal that you put in fixed annuities usually is protected from the volatile markets. The best feature of a fixed annuity is the "guaranteed" payments that the insurance company is able to offer you as stated in the annuity agreement.

Fixed annuities are also tax-deferred. This means that your money on annuities benefit from tax relief for a period that your money stays untouched on the annuity. Some retirement vehicles may be required to pay taxes for every penny earned. Not so with fixed annuities. The taxes that you would have paid for your regular earnings are deferred at a later time, usually when you make your first withdrawal or receive your first payout.

But until then, your money would be safe from taxes. This money would make its way back to your principal and earn interest for you. With the wonders of compounding, your money will be earning more in less time due to the tax-deferred feature of your annuity.

Fixed annuities may also be able to provide you with a lifetime income. This will further assure you that your annuity will be able to provide you with an income stream after your retirement and beyond. What makes fixed annuities very attractive is that terms can be set on payouts that will later benefit not only you but also your beneficiaries.

With a fixed annuity, you can set terms that your family may be able to receive your annuity payments for a certain time period, even after you die. This can be made possible if you agree to set a guaranteed period of payment for your annuity. This will commit the insurance company to continue annuity payments for a given period of time after you die to a designated beneficiary.

Fixed annuities also offer you tax-free transfers among your investment options. You may be able to allocate your funds to other investment options without tax consequences involved. This allows you to optimize your funds in order to earn the most for you when you want it. With all these benefits provided for you through a fixed annuity, you have no reason not to try it out. If you are considering putting some of your money in a retirement fund, you should consider fixed annuities on top of your options.


Posted by Ardent Editor on Feb 26 2007 in Annuities

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