A fixed annuity gives you the stability of a fixed interest rate that’s guaranteed for a set number of years.
How do fixed annuities work?
A fixed annuity has two phases – an accumulation phase and an income phase. During the accumulation phase, the money you contribute to your annuity will earn interest at a fixed interest rate. During the income phase, the money you’ve accumulated in your annuity can be turned into a stream of income payments.
Fixed annuity advantages
Here are some things to know as you consider a fixed annuity:
- Protection from loss: With a fixed annuity, your annuity won't lose value, regardless of market conditions, unless you withdraw money or surrender your annuity during the early withdrawal period.
- Steady, predictable growth: Fixed annuities are guaranteed to grow in value at a fixed interest rate.
- Tax deferral: You don’t pay taxes on the interest your annuity earns until you start receiving payments or take a withdrawal, so your annuity may grow at a faster rate.
- Guaranteed retirement income: When you’re ready to turn your annuity into retirement income, you can select from a variety of payout options, including an income stream that will last for the rest of your life.
A fixed annuity may be the right choice to protect your principal while safely growing your money at a fixed interest rate. If you’re interested in growth based on market performance, you may want to consider a fixed-indexed or variable-indexed annuity.