Fixed-rate annuities are similar to bank CDs. A lump sum payment ensures a fixed interest rate of 3-10% for 1-10 years. The premium, or initial deposit, ranges from $5,000 to $100,000. Fixed annuities are risk-free investments that typically outperform comparable long-term investments in terms of yield. Fixed annuities differ but generally have the following features: Guaranteed Rate: Comparable to a certificate of deposit (CD), this contract guarantees a fixed interest rate for a specified period. Retirement Income: It is an excellent way to guarantee regular retirement income. It ensures peace of mind and consistent growth when you retire. No risk: There is no risk because money can only be lost if the insurer goes bankrupt and your investment exceeds the state annuity insurance limit. No Hassle: There is no need for micromanagement. Sign the contract, pay the premium, and receive lifetime paychecks. 3%-10% Return: High rates of return on a low-risk investment. Better than CDs, particularly over longer periods. Lifetime Income: The optional Lifetime provision guarantees paychecks for the rest of your life. There’s no need to be concerned about outliving your annuity retirement income. 2-10 years: Fixed annuities are available in terms ranging from 2 to 10 years. Longer terms result in higher rates. Single Premium: There is only one initial payment. A new annuity will be required for future investments. Life insurance: An optional provision that provides death benefits to loved ones. Save money by not purchasing a separate policy. Contributions are unlimited: You can buy as many annuities as you want. The IRS will not be breathing down your neck. Inheritance: Leave money to loved ones without probate. Avoid paying estate/death taxes. Inflation Hedge: Outperform inflation by a wide margin. CDs and money market accounts barely cover basic living expenses. Tax-Free Gifts: You can make an annual tax-free gift of up to $10,000 per recipient. Performance of Fixed Annuities You can expect solid, guaranteed growth if you don’t cancel your fixed annuity prematurely. The tax benefits will compound and earn far more than a CD, money market account, or mutual fund portfolio. Do you want to see some hard facts? The following section compares a typical fixed annuity, CD, and money market account. Fixed Annuity Performance shows a real-world example of fixed annuity growth and graphs of the tax-deferral benefit in action. Types of Fixed Annuity Fixed annuities are classified into three types: fixed immediate, fixed deferred, and CD. Immediate and deferred payments specify how payments are made, either monthly or after a period (typically 5+ years). CD-type annuities combine the best features of both CDs and fixed annuities. As a result, they operate similarly to conventional fixed annuities, except for the size of their guaranteed rate. Choosing the Most Beneficial Fixed Annuity A suitable fixed-rate annuity must balance a high rate and flexible terms. The longer the commitment and the less flexibility, the higher the interest rate. Fixed Annuity Disadvantages You know all the benefits of fixed annuities, but are you aware of their drawbacks? It is accurate to say that no investment is completely risk-free, and annuities are not an exception to this rule. Fixed Annuities Alternatives A healthy retirement plan should have multiple investment options. After all, diversification is the first rule of investing. Discover what other types of investments are appropriate for retirement savings. Examine CDs, mutual funds, bonds, treasuries, money market accounts, 401(k) plans, and other investment opportunities. Compare and contrast the characteristics of fixed annuities with variable and equity-indexed annuities. Fixed Annuity Pitfalls No investment is suitable for everyone, and annuities are not exempted. Watch out for excessively restrictive withdrawal schedules, unstated fees, and the “guaranteed” rate duration. For a comprehensive list of potential pitfalls, see Fixed Annuity Pitfalls. Who Should Buy a Fixed Annuity? Fixed-rate annuities are ideal for retirees, as well as those concerned about market volatility. Although fixed annuities have a lower potential for windfalls than variable annuities, their guaranteed rate of return outperforms many other investment vehicles. As a result, fixed-rate annuities are best suited to retirees and the most conservative investors.
Contact Information:
Email: [email protected]
Phone: 7735026467
Bio:
I grew up in Dubuque, Iowa, where I learned the concepts of hard work and the value of a dollar. I spent years in Boy Scouts and achieved the honor of Eagle Scout. I graduated from Iowa State University and moved to Chicago and spent a few years managing restaurants. I then started working in financial services and insurance helping families prepare for the high cost of college for their children. After spending years in the insurance industry, I moved to Arizona and started working with Federal Employees offing education and options on their benefits. I became a Financial Advisor / Fiduciary to further help people properly plan for the future. I enjoy cooking and traveling in my free time.
Disclosure:
Investment advisory services are offered through BWM Advisory, LLC (BWM). BWM is registered as an Investment Advisor located in Scottsdale, Arizona, and only conducts business in states where it is properly licensed, notice filed, or is excluded from notice filing requirements. BWM does not accept or take responsibility for acting on time-sensitive instructions sent by email or other electronic means. Content shared or published through this medium is only intended for an audience in the States the Advisor is licensed in. If you are not the intended recipient, you are hereby notified that any dissemination, distribution, or copy of this transmission is strictly prohibited. If you receive this communication in error, please immediately notify the sender. The information included should not be considered investment advice. There are risks involved with investing which may include market fluctuation and possible loss of principal value. Carefully consider the risks and possible consequences involved prior to making an investment decision.
