In short, Fixed Annuities are a contract between you and an insurance company for a guaranteed rate of interest and guaranteed income options.  Fixed Annuities have two stages, the first stage is commonly referred to as the “Accumulation Phase.”  During this period, the assets in the annuity grow or “accumulate” based on a specified interest rate which is guaranteed by the insurance company.  

The second phase is the annuitization or “Income / Payout” Phase.  This option provides you the ability to “Annuitize” the contract and receive a guaranteed payment for either the rest of your life or you may choose a shorter, more specific time frame.*  Although the payout phase is not required, it is a benefit that many enjoy, as it provides a sense of security that during your lifetime, you will never run out of money.

*All annuity contracts are not the same, and benefits as well as payment options will differ from one insurance company to the next. 


Benefits of Annuities

Fixed annuities are known for providing both growth and safety.  They are an excellent tool to help you plan for your financial security, while providing the peace of mind you deserve. In addition, there are a few other factors that one should consider:

1.  Safety of Principle

Unlike most securities or mutual funds where your account balance will fluctuate,  premiums deposited into a fixed annuity are guaranteed against loss of principle.

2.  Tax Deferred Growth


All annuity values accumulate on a tax deferred basis until withdrawn.  Therefore, your money can grow faster because you earn interest on dollars that would otherwise be paid as taxes.  Your premium earns interest and the interest compounds allowing you to accumulate more money over a shorter period of time, thereby earning a greater return on your investment.

3.  Liquidity

Annuities provide you with opportunities to withdraw funds (subject to any applicable surrender charges, Interest Adjustment and/or IRS penalties).  Fixed annuity contracts generally allow for some form of penalty-free withdrawals up to 10% of either the full Accumulation Value or 10% of premiums paid, once each contract year after the first contract anniversary.  Most companies offer certain riders that increase liquidity in certain circumstances.

* Riders are not available in all states for all products.                                            

4.  May Avoid Probate

Annuities offer the ability to name a beneficiary, which may minimize the expense, delays, and publicity that come with probate.  Your named beneficiary may receive death proceeds as either a lump sum or monthly income.

5.  Guaranteed Lifetime Income

Annuities can provide you with a guaranteed income stream.  You have the ability to choose from several different income options, including life or a specific period. With non-qualified plans, a portion of each income payment represents a return of premium that is not taxable, reducing your tax liabilities.