Fixed Annuity Accounts
A fixed annuity is an investment with an insurance company and most closely resembles a bank certificate of deposit. Fixed annuities offer regular monthly interest and are usually established for a set number of years.
Some fixed annuities use a floating interest rate that can change from year to year while most others use a fixed rate that is declared at onset. An example of a fixed rate multi-year annuity would be a 5 year account that credits 3% interest for all five years – no more no less. After the 5 year term, your can reinvest in another annuity, withdraw all funds, or in some cases continue the policy surrender free at the declared rate.
Fixed Annuities Are Safe And Insured Investments
By investing in a fixed rate multi-year annuity when rates are high, you have the ability to lock in better returns 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 more 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 better rates and more growth.
In response, 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 before investing with your local bank.
Why Invest In A Multi-Year 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 has ended, you can invest in a new annuity while still deferring all of your gains using the 1035 tax-free exchange rule.
Annuities are also a popular vehicle to save for retirement. You can make systematic contributions to a qualified or non qualified retirement annuity each year. The principal and interest grow tax-deferred each year and your gains compound daily until retirement is reached. At that time, you can systematically withdraw the interest and/or principal in order to create lifetime retirement income.
Tax Sheltered Annuity and 403(b) Retirement Accounts
Tax sheltered annuity 403(b) accounts are widespread among those working in the public sector. Most have fixed, indexed and variable investment options to choose from. Upon separating from employment, it is common for account owners to consider rollover options.
At retirement, 403(b) accounts can be rolled over into an IRA or other qualified annuity contract. This tax-free process can allow the owner to establish an investment more suited to their individual risk preferences. Fixed and indexed annuities are popular as they have no direct exposure to the market and cannot lose value. They can also be used for a lifetime income stream.
After Tax Retirement Contributions And Savings
Another approach is to fund a non-qualified annuity with after-tax dollars. Contributions are not tax deductible like a qualified plan, but the investment grows tax deferred until income is needed.
Non qualified annuities can be subject to penalties if withdrawals are taken before age 59 ½ (unless certain hardship conditions are met or the account is annuitized over a lifetime) but they can grow tax-deferred for a lifetime. And there are no Required Minimum Distributions to worry about.
After tax annuity accounts can be established to create an investment that would provide guaranteed interest and systematic income during retirement. It would be a self-funded, flexible pension-like account offering tax advantages and income flexibility.
Annuity Pensions Provide A Lifetime Income Stream
Fixed and indexed annuities are growing in popularity as they are some of the few investments with the ability to provide a lifetime income stream. Upon retirement or during another time of need, you can systematically withdraw principal and interest over a set number of years – or for a lifetime. This strategy is referred to as an annuitization and is popular for those needing reliable income during retirement.
There are a number of ways to setup these types of accounts. Immediate annuities begin payments right away. Deferred income accounts will activate after a predetermined number of months or years. Other fixed and indexed accounts have optional income riders that provide flexibility as to when and how the income is withdrawn. Still others offer increasing income each year once the payments begin.
Request Fixed Annuity Information And Illustrations
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 independent brokerage offers annuities from several providers.