Fixed Annuities Work As Retirement Savings Accounts
Insurance companies issue annuities, a form of investment that is generally offered via Insurance agents. Once an investor pays into the annuity, the annuity earns interest for a set period of time. With fixed annuities, the capital invested is guaranteed. They are a safe, popular and tax-deferred way to increase your wealth.
Several factors are used to structure annuities such as changing the time period of money deposit, changing the number of income payments and others, etc. A fixed annuity offers security to the investor as the issuing company confirms a minimum interest to the investor for a set period of time beforehand. Often, with fixed annuities, policyholders can get a minimum benefit payment as well. Thus, in the case of a fixed annuity, the investor already knows the expected interest from the annuity before signing the contract.
One option for an individual with fixed annuities is to choose an immediate income annuity. After making a lump sum payment, the owner then receives immediate fixed monthly income, thus turning a lump sum into a retirement income stream.
You can purchase a fixed annuity either with one lump sum payment or in installments. The traditional fixed annuity offers regular growth that does not rely on external, volatile factors such as stock market values or equity growth funds. Their return is in the form of regular interest payments compounded within the policy or made to the annuity owner.
With tax-deferred annuities, the investor either deposits a lump sum and accumulates interest over time, or makes payments into the annuity, with the returns being paid out after a set period of time. This kind of fixed fixed annuity is often used as a retirement savings plan. Many individuals fail to plan for their income needs in retirement. In many cases a fixed immediate income annuity can fill the gap.
- Curtis McDowell