Fixed Annuity

A fixed annuity is an investment opportunity offered by an insurance company that guarantees fixed payments over the life of the investment. They can also be used for accumulation only, if the investor desires. Annuities are most often used as retirement accounts. With a fixed annuity, no taxes are paid on the account until the monies are paid out, which means you can grow your capital tax-free for years and greatly reduce your tax burden.

Finding the Right Fixed Annuity
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Unlike IRAs (either traditional or Roth), there are no contribution limits or income limits. Fixed annuities could be a good investment for the individual who has already contributed the maximum to an IRA and is looking to increase tax-deferred savings. A fixed annuity will also guarantee a minimum rate of return, unlike a variable annuity. A fixed annuity, however, will have fewer investment options.

With a fixed annuity, a guaranteed interest rate is locked in for an initial period. After that, interest rates may be adjusted according to market condition, generally each year, or remain at the initial level. Fixed annuities will typically offer a guaranteed minimum interest rate, however, unlike Certificates of Deposit (CDs).