Fixed Annuity Overview
Fixed annuities are retirement saving interest-based vehicles
that look similar to bank-issued CDs. However, they usually have
higher interest rates than the average CD. Typically, annuity
interest rates interest rate ranging from 1% to 8% for a period
of 3 to 15 years. The initial deposit, also called the premium,
can range from $2,000 to $10,000,000.
Fixed annuities are backed by insurance companies. They are
considered very low risk, have more liquidity than CDs, have
tax deferral, and typically offer higher yields than bonds, CDs,
treasuries, or money market accounts.
Most fixed annuities offer a lifetime income option similar to a SPIA. This allows you to convert accumulated savings into a guaranteed monthly income for the rest of your life. This feature is highly desirable to many retirees and sets annuities apart from other types of retirement investments.
Fixed Annuity Features
Fixed annuities come in many shapes and sizes. Below are some of the most common attributes.
• Single Premium You only have one chance to fund the fixed annuity. Most fixed annuities do not have flexible
premium. Future investments would require purchasing a new annuity
• Guaranteed Rates — Contractually guaranteed fixed interest rate for x number of years, like a CD
• Very Low Risk — Money is contractually guaranteed by the insurance company and can only be lost if the insurance
company becomes insolvent and your investment exceeds Annuity State Guaranty Limits.
• Retirement Income — Most fixed annuities allow the owner to sweep off their interest gains each year making it an
ideal source of secure monthly retirement checks.
• Lifetime Income — This is an optional feature on most fixed annuities that allows the owner to start a lifetime
income off of the accumulation value.
• 1-15 Year Term — Fixed annuities are available for short, medium, or long terms. The longer term, the higher the
annuity interest rate.
• Hassle Free — No need to check your statement or account every day.
• Unlimited Contributions — Unlike an IRA that has investment limits, annuities are essentially unlimited in the
amount of money that is allowed by an individual(s).
• Inheritance — Annuities are free of probate. An option for people looking to avoid estate/death taxes.