The Basics On Fixed Annuities

The Basics On Fixed Annuities
by Takara Alexis

There are a lot of annuity products attainable today. One of these great products is the fixed annuity. Fixed annuities come in two main forms. Some have a deferred payout and those that have an immediate payout. Immediate annuities seek to payout income upon inception, while deferred annuities defer payment until a later date.

Fixed annuities are usually compared to certificates of deposit (CDs) by those investors looking for safety. Just like many other financial products you must evaluate the pros and cons in deciding which might be more appropriate for your financial needs.

Both CDs and fixed annuities usually base their rates on current market conditions and time of maturity. Generally, the longer you wait for it to mature, the higher the yield you will receive. Fixed annuity rates have been traditionally higher than CD rates because of longer maturities and rate circumstances. Fixed rate annuities might have the edge in longer-term returns, but they aren't short-term investments. The usual deferred fixed annuity ranges in periods from 3 to 10 years.

It's very substantial that you comprehend the liquidity issues as they may relate to your CD or fixed annuity investing. CDs may provide for a shorter time, but that doesn't necessarily mean they're liquid. When buying a CD you are obligated to that CD's time period, most commonly twelve months. If you prematurely withdraw any amount of your principle, you'll be subject to interest fines.

Tax deferred fixed annuities are precisely that-deferred from tax. Which means that income within your annuity isn't taxable until it is withdrawn. As time goes by, tax deferred growth outpaces taxable investments being as earnings compound without current income taxation, yearly. It's very important to note that annuities are taxed just as regular income, so it is better to take out withdrawals when income taxes are lower, such as retirement.

Fixed annuities are guaranteed by the full faith and credit of the issuing insurance company, and they are not contained or supported by the government. The higher rated insurance companies have to meet stringent capital requirements to back up annuity and life insurance obligations. You should choose the higher rated company while comparing fixed annuity rates. If you go with a lower rated annuity company for an insignificant increase in rate just isn't worth the extra risk.

Because of the Internet you are able to get a number of competitive fixed annuity quotes simply by clicking the mouse. This is a good way to locate the best fixed annuity rate, but you have to proceed with extreme caution. Working with a trusted independent agent is recommended here, because they can give the much-needed guidance, as well as the top fixed annuity rate you are looking for.