Fixed Annuity Accounts
A fixed annuity is an investment with an insurance company most closely resembles a bank certificate of deposit. Fixed annuities offer regular monthly interest gains and are usually established for a fixed number of years.
Some fixed annuities use a floating interest rate that can change from year to year, but multi-year guaranteed annuities are most popular as they have no moving parts. An example would be a 5 year fixed annuity that credited 3% interest for all five years. After the 5 year term, your money is free and clear – or you could invest for a new term that best suits your investment goals.
Fixed Annuities Are Safe And Insured Investments
When investing in a fixed multi-year annuity when rates are high, you have the ability to lock in better rates for your investment time horizon.
Conversely, when interest rates are low, and may be rising, investing in a floating rate or short term annuity can be beneficial. We offer a wide array of fixed annuities depending on your needs and investment timeline. The most common annuity lengths are between 2 and 10 years.
Fixed annuities are a stable and very safe alternative to certificates of deposit, interest-bearing government bonds, corporate bonds, municipal bonds, as well as other stock and bond market instruments.
Annuity policies are in demand as they offer tax-deferred growth, safety, flexibility, monthly interest payments, and/or lifetime income options. Many consumers have started exchanging certificates of deposit and money market funds for annuities to lock in higher rates of return and better overall interest rates.
Thus, many banks have hired licensed insurance agents to offer annuities in order to protect the bank’s deposits. However, banks only offer annuities from a small number of insurance carriers. This lack of diversity can greatly limit your options and reduce your potential for higher returns. It is best to shop around with an annuity broker like us before investing with your local bank.
Why Invest In A Fixed Annuity Policy?
You might purchase an annuity policy for many reasons. In some cases, tax deferred growth is desired. You can defer income taxes for your entire lifetime in a non-qualified annuity. When the term is up you can use the 1035 tax free exchange rule to invest in a new annuity while still deferring all of your interes gains.
Another popular use for annuities is to save for retirement. You can save for your future by making systematic contributions to a qualified or non qualified annuity each year. The principal and earned interest will grow tax deferred and compound daily until retirement is reached. At that time, you can live off the interest and/or principal through systematic withdrawals.
Tax Sheltered Annuity and 403(b) Retirement Accounts
In other cases, you might invest a portion of your salary each month into a tax sheltered annuity (TSA) through your employer. Your annuity retirement contributions are tax deductible each year.
In fact, many teachers utilize tax sheltered annuity accounts for retirement purposes. Retirement plans for teachers, public employees, and non-profit groups invest in 403(b) annuity plans quite often.
When you retire, the investment accounts can be easily rolled over into an IRA or other qualified annuity account. This would also allow the owner to establish an account more suited to their post working needs – presumably one with less risk.
After Tax Retirement Contributions And Savings
Yet another approach is to fund a fixed annuity with excess after tax savings. The contributions are not tax deductible like a qualified plan, but the investment grows tax deferred until income is needed.
These annuity types are classified as non-qualified annuity plans and remain subject to penalties if withdrawals are taken before age 59 ½ – unless certain hardship conditions are met or the account is annuitized for your lifetime.
However, you are not subject to a required minimum distribution at age 70 ½ like you would be with a qualified retirement plan. You can fund an after tax annuity in order to create an account that would provide guaranteed interest and reliable income during your retirement years. It would be a self-funded, very flexible pension offering tax advantages.
Annuity Pensions Provide A Lifetime Income Stream
Fixed annuities are growing in popularity as they are one of the few investments with the ability to provide a lifetime income stream. Upon retirement or during another time of need, you can withdrawal the principal and earned interest over a set period of time or for a lifetime. This strategy is referred to as an annuitization and is an option, but not a requirement.
Insurance professionals refer to these accounts as immediate annuities. It is important to note that you can setup a lifetime income account while also establishing guaranteed payments for a set period of years. This is called a period certain and establishes that either you or your beneficiaries receive the entire balance of the investment plus interest.
Corporate And Business Owned Annuities
Individuals are not the only potential annuity investors. A business or corporate entity might purchase an annuity to diversify their investment portfolio.
Business owners may feel their exposure to stock and bond market instruments is too high and the corporation would benefit from predictable, fixed interest yielding account. In this case the annuity would be setup using the tax identification number of the corporation instead of an individual. While corporately owned accounts will not grow tax deferred, they will still offer a conservative and flexible alternative to riskier market based investments.
Request Annuity Information And Illustrations
In summary, fixed rate annuity accounts are ideal if you desire a safe and insured investment. They are reliable, predictable, and most importantly safe investments during all market cycles. A fixed annuity is well suitable for conservative investors who desire either systematic interest payments or compounding interest growth. You can invest confidently to provide for your current needs or for a more secure retirement.
Our Fixed Annuity Providers
Currently we offer fixed rate annuities from Allianz, American General, Aviva, Delaware Life, Employees Life, Equitrust, Guggenheim, ING, Investors Insurance, Jackson National Life, Lincoln Financial, Midland, Sagicor, Sentinel Life, Transamerica, Valic and many, many others.