Frequently Asked Questions
- » What is an annuity?
- » What is a fixed immediate annuity?
- » What is a fixed deferred annuity?
- » Is a fixed annuity right for me?
- » When should I buy?
What is an annuity?
An annuity is a contract from an insurance company. In exchange for your contribution (premium), the insurance company promises to pay income to you for a period of time you specify. These contracts may contain other features as well.
What is a fixed immediate annuity?
A fixed immediate annuity is an annuity that begins guaranteed income payments to you "immediately," usually one month after your premium payment. You may choose to delay the beginning of income payments for up to one year after paying the premium.
What is a fixed deferred annuity?
A fixed deferred annuity is an annuity that offers to pay income to you beginning at some future date that is at least one year after the premium payment. During this "deferral" period, the insurance company credits interest to the premium you pay. Although interest rates may vary, all fixed deferred annuities offer a minimum interest return.
Many deferred annuities allow withdrawals, in whole or in part, before income payments begin. The flexibility to take withdrawals and the charges for making withdrawals vary from contract to contract.
Is a fixed annuity right for me?
In general, fixed annuities are long term insurance contracts. They are intended for individuals in or near retirement.
An immediate annuity may be right for individuals who:
- Desire more guaranteed income in order to offset the risks of longevity and market volatility
- Want the option to have their income payments increased to help keep up with inflation
A fixed deferred annuity may be right for individuals who:
- Are not yet ready to create a guaranteed income stream
- Want to protect the value of assets they already saved
- Want the opportunity to earn a guaranteed fixed interest rate
When should I buy?
If you're ready to convert a portion of your assets into guaranteed income, now may be a good time to consider an immediate annuity.
If retirement is still years away, or if you are in retirement and simply looking to protect some portion of your assets from market volatility, you may want to learn more about fixed deferred annuities. They may provide the protection you want plus the potential for more interest than may be available from other savings sources.