Fixed annuities earn interest at a set rate, for a specified period of time. A fixed annuity may be a good choice if you want predictable interest and no risk of losing the money ("principal") you've placed in the annuity.
Fixed annuities can offer:
- Principal protection
- Tax-deferred growth
- Income options, including income for life
- Death benefit options
How do fixed annuities work?
- You give the insurance company money in one or more payments.
- The insurance company then invests it on behalf of all annuity owners.
- During the accumulation phase, your annuity will earn a fixed rate of interest that is guaranteed by the insurance company.
- You defer paying taxes on your contract’s interest until you receive money from the contract. Tax-deferred interest means the money in your contract can grow faster.
- After a period of time specified by your contract, you may then receive the amount allowed by your contract in a lump sum, over a set period of time, or as income for the rest of your life. This is known as the distribution phase.