Fixed Annuities

A fixed annuity is an insurance contract that guarantees a buyer a specific, guaranteed interest rate on their contributions to their annuity account. This is in contrast to variable annuities, which pay interest that can fluctuate based on the performance of an investment portfolio that is chosen by the account’s owner.

If you are considering a fixed annuity in your retirement planning, here is everything you need to know.

What Are Fixed Annuities?

You can buy a fixed annuity using a lump sum of money or a series of payments that are made over time. The insurance company then guarantees that the account will earn a certain rate of interest during what’s called the accumulation phase. When the annuity owner decides to begin receiving regular income from the annuity, those payments are calculated based on the amount of money in the account, the owner’s age, and how long payments are meant to continue.

How Long Do Fixed Annuity Payments Last?

Fixed annuity payments last until they are scheduled to end. If you have an annuity that won’t end until the end of your life, the payouts will never end.

Are Fixed Annuities Tax-Deferred?

During the accumulation phase, fixed annuity accounts grow tax-deferred. When the account holder annuitizes the contract, distributions are taxed based on the exclusion ratio. This ratio is the account holder’s premium payments to the account and gains from interest earned during the accumulation phase.

Benefits of Fixed Annuities

Fixed annuities can be preferable because they offer predictable investment returns. The rates on these annuities are derived from the yield that is generated in an investment portfolio. The company then has to pay whatever rate they have promised in the annuity contract. This allows you to have guaranteed minimum rates and predictable returns.

Find A Fixed Annuity

You can find a fixed annuity to pay for your retirement. Just call Alvarado Master Agency to get started with your search. We can provide you with all the assistance you need to select an appropriate annuity for your needs.

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