There is a wide variety of annuity products accessible today. One of these popular products is the fixed annuity. Fixed annuities come in two leading forms; those that have a delayed payout and those that have an immediate payout. Immediate annuities look to payout income at the beginning, while deferred annuities put off the payment until a another 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.
Generally CDs and fixed annuities both base their rates on current market conditions and time of maturity. Typically, the longer you wait to maturity, the higher the yield you can receive. Traditionally, fixed annuity rates are higher than CD rates due to longer maturities and rate conditions. Fixed rate annuities may have the edge in longer-term returns, but they are not short-term. Usually deferred fixed annuity stretches in periods from 3 years to 10 years.
It is crucial that you understand the liquidity issues as they could relate to your CD or fixed annuity investing. CDs might provide for a shorter time horizon, but that does not mean they are liquid. When purchasing a CD you're tied to that CD's time period, typically one year. If you withdraw any amount of your principle prematurely, you will be subject to interest penalties.
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 Which means that income within your annuity isn't taxable until it is withdrawn.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 faith and credit of the insurance company, and are not limited or backed by the government. The higher rated insurance companies must meet stringent capital requirements to back up annuity and life insurance obligations. Always choose the higher rated company when you compare fixed annuity rates. Picking a lower rated annuity company for an small increase in rate just is not worth the crazy risk.
Thanks to the Internet you can get a number of competitive fixed annuity quotes with a click of the mouse. This is a great way to find the best fixed annuity rate, but you must proceed with extreme caution. Working with a trusted independent agent is recommended here, as they can give you the proper guidance you need, along with the top fixed annuity rate you're looking for.
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