How Do Fixed Annuities Work?

Annuities ensure that you can retire comfortably. But the other important factor is that it resolves the anxiety of the possibility of outliving retirement savings. Fixed annuities are the safest of all annuity types, making them well worth considering.

What Does It Mean When An Annuity Is “Fixed”?

Fixed annuities get their name from the way they build in your account. When you purchase a fixed annuity, your investment will grow at a specified interest rate so that you’ll get more out of it than you initially put in. This not only makes it a worthy investment, but one that prevents your money from losing value.

How Does The Account Grow?

One of the most appealing features of fixed annuities is the tax-deferred growth. The money you have will not be subject to income tax, even though there is more of it in your account. This works similarly to other types of retirement accounts like Roth IRAs and 401(k)s. You won’t have to pay taxes on your annuities until you begin receiving payments.

How Do The Premiums Work?

There are two types of premiums – single and flexible. With a single premium, you make one large contribution to your fixed annuity as a lump sum payment. Individuals will often choose this route after maxing out a 401(k) and rolling it over into the annuity. Flexible premiums consist of multiple payments over time.

When Do Payments Start?

This depends on whether you choose an immediate or deferred annuity. An immediate annuity is purchased as a single premium, and then you’ll receive your payments within a year. 

Deferred annuities remain in an account for a certain number of years before payments begin. Once you have funds in the account, you cannot withdraw them without incurring a withdrawal penalty. However, time can work to your advantage, as your account will have more time to grow.

How Long Will The Payments Last?

You can choose to have your fixed annuity payments last for the remainder of your life or have them last for a certain number of years in a term-certain payout (also called period-certain and fixed-period).

If you’re married, you can pass your annuity payments to your spouse after you pass away, as part of a joint-and-survivor benefit.

You may also name a beneficiary if you have a term-certain payout, where your loved one would receive the remainder of your payments if you pass away before the term ends. 

Other policies include optional riders for items such as additional death benefits and cost of living adjustment riders so that your payment amounts will be consistent with the inflation rate.

Secure Your Financial Future Today

At Secure Insurance Group, we’re here to help you reach your retirement goals so that you can retire happily and comfortably. When you work with us, we will make your money work for you. Call us today at (417) 883-9300. You can also reach us at 1-877-871-7328.

Secure Insurance Group

Helping Individuals, Families, and Business Owners SECURE their future.

3506 S Culpepper Cir Suite A
Springfield, MO 65804

1-877-871-7328

417-883-9300

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