Fixed Annuity – Guaranteed Income. For Life.

There are very few guarantees when it comes to investing. But when you’re planning for the long term, a guarantee might be exactly what you want. With a fixed annuity, you’ll always know what your money is earning - even in an unpredictable economic landscape.

Here’s what you need to know about fixed annuities. Like any annuity, the annuitant buys into a policy, either with a lump sum or premiums over a period of time. When the annuitant reaches a certain age, or retirement (whichever is greater), he/she begins to receive payments. The money you put in earns you a guaranteed rate of return for a certain period of time. Your fixed annuity offers a guaranteed rate for a certain period of time, which you agree upon at the time you purchase. If you still want a guarantee when that period is up, you can choose to renew at a new rate. Renewal rates work differently for different annuities, so talk with your financial planner to ensure sure you understand what your renewal rate will be.

Since an annuity is issued by an insurance company, they handle all the investment decisions. Typically, the insurance company issuing a fixed annuity invests the premiums in low-risk investment vehicles such as bonds. They’ll pay you the interest rate they promised, no matter how the investments perform. Remember, one benefit of an annuity is a steady stream of income. And since the rate is guaranteed and fixed, you’ll know exactly what your income is going to be, which can be a huge relief.

Now that we've got the nuts and bolts of what an fixed annuity is out of the way, let's look at reasons why fixed annuities are a good idea.

First and foremost, the biggest reason anyone would consider investing in a fixed annuity would be the fact that they offer a guaranteed return on your initial investment and provide a guaranteed income later in life. Financial security is a common theme on most peoples minds, the current recession and economic uncertainty have exacerbated this notion amongst the general public. Another great feature of a fixed annuity is that the money earned by the annuity won't actually be taxed until such time as you begin receiving payments. The annuity essentially lets your money grow by having deferred taxes. What this means is that you won't be required to pay taxes on the money earned by your annuity until you start receiving payments - if you're in a lower income tax bracket when the payments from your annuity begin, you'll pay less marginal income taxes on the money you earn.

From time to time, circumstances may dictate that you need to access the funds before the specified and agreed upon date that payments are scheduled to start. If for some reason you must gain access to your money early, you can (typically) withdraw up to a certain amount each year without having to pay a penalty or fee.

An annuity can also help to lessen any financial burden for your spouse or children if you die. Usually, your estate would have to go through a (sometimes lengthy) legal process before your beneficiaries can access it. With an annuity, they won’t have to wait.

In the event that this happens before you start receiving your scheduled annuity payments, your beneficiary will get a “death benefit” that usually equals the total value of the annuity. If you’ve already started to receive payments, the remaining guaranteed payments would then go directly to your beneficiary.

To summarize:

-A fixed annuity can be a guaranteed source of income for you later in life.

-Provides the security of principal protection and guaranteed rates.

-Is beneficial if you're retiring or changing careers.

-Can ensure financial security for your spouse and children.

Consider these benefits and how they may benefit your own life, both now and later on. Your financial planner will provide you with details and options and will assist you in making choices that are tailored to your lifestyle and income. A fixed annuity can be the initiated now, but the benefits will last you a lifetime.