What is a Fixed Annuity?

A fixed annuity is an investment vehicle offered by an insurance company.  They offer a guaranteed fixed rate of interest for a fixed period of time.  A fixed annuity is one of the best investment options available for a conservative investor or for someone who may be uncomfortable with risking their retirement in the stock market.

A fixed annuity is one of the best investment options available for a conservative investor or for someone who may be uncomfortable with risking their retirement in the stock market.

This investment is sometimes referred to as a “tax-deferred annuity”.  It defers any taxes on the earnings until you make a withdrawal or begin receiving income from it.  Fixed deferred annuities help you save for retirement through the power of tax-deferred compounding. Your annuity contract earns a safe, competitive return on a continually increasing investment.  Some companies offer the option not to annuitize after a certain time period.  It is referred to as a “walk away”.  This allows you to change your investment strategy if you feel it’s necessary.  If the economy recovers and the stock market is booming, this option allows you to take all or some of your investment and diversify into other investments.

What is an Equity Indexed Annuity?

Equity indexed annuities offer you a guaranteed minimum return in exchange for a limit in maximum return. You get less upside but much less downside.

Annuities have long been seen as a safe way to earn a good return on your money while deferring the taxes on your gains. Fixed annuities offer a specified and company guaranteed return, but you pay for that guarantee in the form of modest returns (because fixed annuities invest your premiums in interest bearing obligations, whose interest rates have historically trailed stock market returns). Variable annuities let you place your funds in any number of investment grade securities and, therefore, offer better returns, but also higher risk.

Equity Indexed annuities offer consumers what could be described as the best of both worlds.  A market based investment with potentially attractive returns, plus a guaranteed minimum return.

Equity Indexed annuities guarantee customers a minimum interest rate (often about 3 percent) while offering the potential of higher rates by tying your return to an index like the S&P 500. This can vary by state.  Click here to fill out our contact form and one of our experts will contact you.

Why Invest in a SPIA?

You Cannot Outlive Your Income
A SPIA (single premium immediate annuity) is particularly attractive because it delivers a stream of income that cannot be outlived. If you choose a life contingent payment option, your payments will continue for the rest of your life, guaranteed, even if you live well beyond your normal life expectancy. A SPIA provides the security that so many retirees seek and need.

Maximize Your Current Income Stream
When your SPIA payment option is life contingent, you may receive a higher income than you would receive from other highly secure, fixed-income instruments, such as U.S. Treasuries or Municipal Bonds. First, you will not need to set aside income today for the contingency that you live beyond your normal life expectancy. Second, a SPIA maximizes your cash flow since each payment constitutes both an interest payment and a return of principal. In contrast, bonds pay interest until maturity and then return the principal at maturity.

Eliminate Investment Risk
SPIA payments do not change in amount or frequency. You will enjoy the financial security of a guaranteed income with no investment risk. Economic conditions or investment returns in the market may change, but your SPIA payments are guaranteed.

Tax-Favored Income
Under current IRS rules use of after-tax funds to purchase an SPIA results in payments that are only partially subject to federal income taxes. The non-taxable portion of each payment represents the return of your original investment over the life of the annuity.

At the other extreme, if you purchase your SPIA with funds from a tax-qualified plan (IRA, TSA, 401(k) etc.), the payments you receive are generally fully taxable as they represent funds that have not yet been taxed.

However, as SPIA payments are made to you over time, taxes will be payable over time. Therefore, even if you purchase an SPIA with pre-tax funds from a tax-qualified plan, you increase your tax-deferral benefit relative to a lump sum distribution, where the entire amount is taxed in the year of receipt.

Current Rates

Florida rates shown, not available in all states.