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Fixed Annuity As The Best Annuity For Retirement Plan

After many long years of working, it is very important that you plan for your retirement by making the right financial investments. There are many retirement options available and they all have their advantages and disadvantages. There are a number of factors to be considered in choosing the retirement plan that best suits you, including your reasons for seeking an investment plan, the kind of retirement plans available, choosing the right insurer, determining the best time to invest, balancing the flexibility of the contract with interest and so on. The length of the guarantee period, the provisions for illness and disability in the contract agreement, and the surrender charges are also factors to be considered. Before we go further, let us enumerate the kind of retirement options available.

First, we have the Individual retirement plans or IRA. As the name implies, these are retirement plans that are started by individuals so as to help them prepare for retirement. Under this, we have the traditional IRA and the Roth IRA. Monies deposited under the traditional IRA plan cannot be withdrawn until the annuitant attains the age of 59½ years. Making withdrawals before this time will attract a charge or penalty.  The Roth IRA is similar to the traditional IRA but in this plan; the interest earned is not taxable and making withdrawals before the stipulated time does not attract a penalty.

Secondly, we have the employer sponsored plans. Under this we have the Defined Benefit plans which allow for equal amounts to be paid out for a specified number of months during retirement, the Defined  Contribution plan in which the employee and employer both make a specific contribution each month and the money is invested in either mutual funds or stocks, the 401(k) Plan in which employers and employees make specified payments but it is tax-deferred until it is due for withdrawal after the investor has reached 59 ½ years, and the Profit Sharing Plan in which all the contributions are made by the employer and they decide how the profit will be shared between them and their employees.

Fixed annuities for retirement are one of the great options because they create a steady income for retirees over long periods of time. With this type of annuities, the investor is rest assured that the ups and downs of the market will not affect his investment and the rate of return is guaranteed. The tax- free nature of a fixed annuity plan affects an investor’s future payout positively. Investments in fixed annuities have proven to be beneficial in the long term for those who are nearing retirement or have retired.

A prospective investor in fixed annuities for retirement purposes should make sure that he invests with a sound insurance company. It is important to read the prospectus of the company and study their history. Also check the company’s rating. A rating of A++ or A+ is good enough. Make sure you are well informed of any fees or charges before making an investment decision. Seeking the help of a professional insurer and relying on one’s good judgment will go a long way in helping the retiree make the best retirement plan decision as well.

To get started, enter your zip code on the top of this page, and then answer some basic questions. This will help you to compare annuity plans from multiple providers for FREE to determine your highest eligible rate. It is important to provide accurate questions to these answers as our pool of providers will provide you with different rates depending on your individual circumstance and situation.

Why Choosing Fixed Annuity Is Better

Fixed annuity is the annuity scheme where one gets a fixed or constant return from the investment made. It has various sub-categories depending on the withdrawal of the corpus accumulated, the premium that needs to be paid, the term for which one is keeping the money etc. The next few paragraphs elaborate on the various types of fixed annuities.

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Fixed annuities can be of the deferred or the immediate type. In the deferred fixed annuity, the premium paid is collected in the fund till the accumulation period gets over and the corpus accumulated with the interest can be withdrawn immediately or as regular payments. Immediate annuity offers a payment just after paying the first installment. This could be on a monthly, quarterly, bi-annually or even annually. The payment will depend on the interest rate on offer, the size of the installment paid, the length of the contract bought. The larger the investment made and shorter the time, the higher the returns.

A Fixed annuity may be of the perpetuity type, if the corpus to be invested is paid upfront and then payments are withdrawn at regular intervals.

Fixed annuities are beneficial for people looking to invest for a long term or as a pension scheme. The advantages of buying fixed annuities include lesser risk as the sum an individual will receive is certain. Unlimited investment is another big factor here. The annuity provider may even attach a proper life insurance scheme with such annuity plans, putting paid to burgeoning life insurance market demand. The amount invested is tax deferred and one can give gift amounts of up to $10,000 tax free to their loved ones and this extends to more than one person. One can also bequeath the collected sum to their near and dear ones without any tax on property or probate or even death! What’s more is that fixed annuities offer cost of living indexation. It revises the value of your corpus deposited so that its real value does not depreciate in periods of rapid inflation. Inflation hedging is automatically incorporated in one’s plan. The fixed premium one needs to pay at regular intervals offers one a better insight into their consumption decision. These annuities pay well on the investment made in plans over 5 years. As a retirement benefit scheme, fixed annuities are definitely lucrative and one should choose it over other annuities.

However, there are certain pitfalls of fixed annuities. The high guaranteed interest rate might be only for a short period. Returns may not be consistent with lapsing time periods as well. The income withdrawal from the annuity plan prematurely, before the age of 59.5 years, will give rise to penalties like the 10% from the IRS apart from regular taxes. Premature withdrawal of fixed annuities attracts a percentage of the amount to be forfeited to the insurance company. Before buying an annuity plan, one should look for a no load plan. In some plans, one gets the interest withdrawal penalty free but the principal withdrawal attracts a penalty.

Owing to these reasons, it is advisable for people to read the plan document thoroughly and weigh the plan against all the constraints, before investing a large sum in the plan.

Compare different providers and the available rates by simply typing in your zip code at the top of this page and answering some easy questions!

Types of Annuities and Its Differences

Different types of annuities are all over the market today. These annuities have their own similarities and differences. That is why it is important to compare and contrast annuities in order for you to hand pick what you think suits you best.

There are two basic types of annuities determined with the timing of paying out to the annuitant – the Deferred Annuity and the Immediate Annuity. These annuities are also divided into two types depending on the investment type suitable to the annuitant. It may either be fixed or variable.

The deferred annuity is an annuity which pays out the annuitant at a specific date, most probably after his or her retirement. This allows a person to accumulate money deferred from taxes. It is an ultimate opportunity to secure the financial stability of a person after his or her retirement at work. A good retirement saving is what it is. On the other hand, immediate annuity begins shortly to pay the annuitant from the time he or she buys the annuity. This kind of annuity converts the annuitant’s assets to an income to be able for the annuitant to receive payment.  If deferred annuity poses a financial security after retirement, immediate annuity serves as an income provider for the annuitant and to his or her family for a time being. Here, they can choose until when the company pays them or their beneficiaries. They can also choose how the company will pay them. It could be monthly, quarterly or yearly.

Both deferred annuity and immediate annuity are offered in two ways. It could either be fixed or variable. Sometimes, some companies offer a combination of the two in a single annuity contract. In fixed annuity contract, the insurance company set a fixed guaranteed interest rate. Unlike in fixed annuity, variable annuity wavers depending on the performance of the investment or the investment company.

The deferred annuity and immediate annuity can either be fixed or variable. Deferred fixed annuity is an annuity contract that guarantees fixed interest rate for a specific period of time. This period may be adjusted by the insurance company the investor selected. Here, the annuitant’s money is placed in the general account of the insurance company. And since the annuity is fixed again, this kind of annuity is not flexible to going up and down rate of payments.

Deferred variable annuity, on the other hand, provides a range of selection of investment options which is referred as subaccounts. These subaccounts have varying objectives which depends on the company. Risk levels are posed as well. However, subaccounts could be a good feature also because of the flexibility offered to the annuitant to change investment strategies or to change subaccounts to another one.

Immediate fixed annuity compromises a stream of income that will not change during the payout period. As the name implies, there is a guaranteed fixed rate of payment. Unlike the immediate variable annuity, the payment will not be affected by inflations which could be a good thing. However, it will not be affected by deflation also.  It is wise for investors to assess their financial status before investing in this kind of annuity. They should try to measure if the payments they will receive are enough to cover his or her needs.

Immediate variable annuity offers a flow of income that will modify or change during the period of payout. The payment to the annuitant will vary from the first payment. It may either go down or go up depending on the performance of the subaccounts mentioned in the contract. Immediate variable annuity may provide more income than immediate fixed annuity. However, the payments will surely be a subject to instability.

Getting a view of the main annuity types is a must before buying one. Annuities are complicated and complex. That is why a right amount of knowledge and understanding about it really make a big advantage.

Now that you have taken a grip on annuities, it’s about time to decide which annuity suits you best. Enter your zip at the top of this page and start looking for annuity quotes of your type.

Types and Features of Fixed Annuity

When trying to answer the question “What is Annuity”, there’s always the need to explore all possible avenues concerning the topic.  There are various kinds of annuity you must know in order to answer the question properly.  Fixed annuity is one of the basic types that come with several features.  Let’s have a look at what it stands for.

FindAnnuitiesBasically, fixed annuity is one of the basic categories you’ll discover when you consider what is Annuity. It’s simply a kind of contract you enter with an insurance company whereby you invest your lump sum. In return, the insurance company pays regular income on a fixed date.

The fixed annuity can be of two major forms namely, immediate fixed annuity and deferred fixed annuity.  You need to explore what both of them stand for to get more clues.

Immediate fixed annuity allows you to receive immediate payment once you’ve made the initial purchase payment into your account.  There’s no change on the fixed agreement once the process begins.   It doesn’t get affected by increase in inflation as well.  In most cases, you’ll not have access to the principal cash once the annuity begins to pay. You’ll only be receiving the income that accrues from the investment on the fixed date you signed with your insurer.

On the other hand, deferred fixed annuity allows you to be receiving a guaranteed amount of income on your investment over a long period of time. In most cases, you have to leave the investment to grow and mature for a long time. You’re expected to enter into a binding agreement with your insurance company over the investment. The interest rate in the deferred fixed annuity is usually tax-deferred.  This means that you’re not to pay any tax on the returns until you’re set to make withdrawals.

Meanwhile the downside of deferred fixed annuity is that it may have high surrender charges.  This can go a long way to reducing the amount you’ll withdraw when the time comes.  This usually depends on the insurance company you’re dealing with.

Whether you’re choosing   immediate fixed annuity or deferred fixed annuity, there’s always the need to be properly informed. You don’t need to work with limited information concerning the investment options. You need to carry out series of research about them before you make the next move. All over the US, there are several insurance companies offering all kinds of annuity. In getting to know what is annuity, you have to explore all the available options. Take your time to compare the various quotes the insurance companies are offering. You must also take your time to know more about the various kinds of annuities the company is also offering. This will help you make the right decision at all times.

To be on a safer side, you need to engage the services of insurance agents and other financial advisers. They will be able to guide you on the right step to take.

Two Main Types of Fixed Annuity

A bunch of annuities are all over the industry nowadays. These annuities vary from one another. It is only right and necessary to be equipped with the right knowledge before choosing one.

There are two main types of fixed annuity. These are the life annuities and term certain annuities. Life annuities refer to the annuities which pay a fixed amount each period to the annuitant until his or her death. On the other hand, term certain annuities pay a predetermined amount periodically to the annuitant until the annuity products expire.

Life annuities have several kinds. This type of annuity is also known as a whole-life annuity and or single-life annuity. There are types of life annuities which are offered all over the globe. Among these annuities are straight life annuity, substandard health annuity, joint life annuity, and joint and survivor annuity. Straight life annuity is the simplest and most inexpensive kind of life annuity. Its only insurance component is providing income until the annuitant dies. This kind of life insurance does not also pay or give money or any kind to the annuitant’s beneficiaries if there are any.

Substandard health annuity is under the straight life annuity category. This annuity may suit annuitants with serious health problems.  The pricing of this depends on the chances of death the annuitant from the time he or she buys an annuity. The lower his or her life expectancy, the higher quantity of money he or she will need to pay.

Joint life annuity is another type of life annuity which refers to annuity that covers two or more individuals. The annuity will terminate after the death of the first covered. Joint and survivor annuity is somehow similar to joint annuity. It also covers two or more individuals.  However, if one of the annuitant dies, let us say the annuitants are married couples, the annuity will continue to pay the living annuitant until he or she passes away too. It is up to them to come with conditions like the remaining annuitant or annuitants may request to receive payments on the event of the untimely death of his or her partner. The annuitants can also specify that the beneficiaries of the annuity will receive a smaller amount of payment after the death of one annuitant.

Term certain annuities are the opposite of life annuities. As the name implies, the annuity insure payments in a term basis. The coverage of this annuity starts from a given period of time and ends in a specified date. No matter what happens to the annuitant if he or she meets an accident or became ill with a disease or sickness, he or she will still receive a beneficial amount of amount regardless. However, if the annuitant dies before the termination of the annuity, the company will get hold of the remaining annuity value. This kind of annuity, apparently may not account to the annuitant’s health condition, accidental situations, or untimely death. One example of term certain annuity is the annuity certain. Annuity certain is an annuity in which the recurring payments for the annuitant are made to a certain period of time. It is also not dependent on the life span of the insured person.

Term certain annuities are way less expensive than the life annuities. It is because they offer lesser insurance options to the annuitants. This kind of annuity may also pose no risk to the insurer and to the company or finance provider.

Now that some types of fixed annuity are laid, it is important to stick in mind that a certain type of this annuity suits a certain type of people depending on his or her condition. Before buying or getting an annuity, one should always consider the right type of annuity suited for him or her needs.

You have just taken your first step. Knowing the types of annuity is very crucial before buying one. And now, it’s time to take the next step. Enter your zip code to find the right annuity quote that suits your need for free.

The Basic of Fixed Annuity from Insurance Companies

Before buying a fixed annuity, it is always good to know what they are and how they function. A fixed annuity is an investment vehicle that allows individuals to earn a fixed income. It is a contract between you as a purchaser of the annuity and the insurance company and its aim is to provide you with specified intervals of payments normally after your retirement. You are guaranteed both principal and earnings. The earnings from the annuity are taxed differed until the time of withdrawal. This means that as the accumulated amount in the account keeps growing there is no taxation on that amount until you decide to withdraw them. It is a safer way of investment.  It also has a death benefit.

A fixed annuity will allow one to withdraw a certain amount from their account around 10% on annual basis without any annuity charges and if you withdraw in excess of the percentage you will be penalized. This is often referred to as the adjustments or surrender charges. They are guaranteed. A fixed annuity is backed by the insurance company’s assets and therefore they are safe. In most states in America, they are secondarily covered by the Insurance Guaranteed Fund. It is safer that a bond or the bond fund shares because sometimes share prices in the case of a bond fund usually fall as a response to the rise in the interest rate.

Most insurance companies that offer fixed annuity do not limit the accumulation period hence enabling you the opportunity to ensure that you assets keeps accumulating.  These annuities are of importance when it comes to planning for your retirement savings and income. It offers you with an option or a method of receiving income and with this type of investment you are assured of income stream for life. The fact that they are tax deferred means that it allows your money to have the benefit of a compounding interest. Note that with annuities you will not get the additional tax advantage when funding a qualified plan.

A fixed annuity is a can Deferred annuity or Variable annuity. The difference between the two is that the fixed annuity guarantees you accumulation of your money at a specific rate of interest while in the case of a variable annuity, the purchaser of the annuity distributes his or her money in many different accounts and it is the accumulated fund that reflects the accounts experience rather than the company. The increase in the amount accumulated depends on the increase or decrease of the values of the accounts.  The fixed annuities are safer than the variable annuities but with variable annuities there is a possibility for greater returns. You will find that sometimes, these fixed annuities are being marketed through brokerage firms and banks. It is, therefore, up to you to ensure that the people who are selling to you the fixed annuity are licensed life insurance agents and where it is variable annuity they must be a licensed security dealer. Take time to find out the name of the insurance company if you are buying from these sources.

How Interest Rates of Fixed Annuity Are Determined

Like any other type of investment annuity needs to be understood, if not thoroughly then reasonably. Annuity involves interest rates that are not only determined by the base rates given by the banks at that particular moment but rather an array of other factors come into play and ultimately determine it. Getting into these factors is a rather expanse topic but understanding how the interest is achieved and how it works as to give you the interest on your principal will do for now.

It is always important to note that the interest rates are always compound. The rates offered by the insurance company are determined by them based on several factors that are commonly known among others that their actuarial scientists come up with. If you have taken a fixed annuity with your insurance company, it is most probable that the company will put the premiums into a government bond or a blue chip bond, this is because fixed annuities are considered to be very conservative and the least stable non-risky investments around are taken. Note that if you have a variable annuity your premiums would be invested in a company’s stock which means if the price falls or if the company suffers drastically then so will your premiums and your fixed annuity as well.

Even when the insurance happens to earn bigger earnings from investing your premiums you will only be entitled to get what you had agreed. Because of this the companies usually make more money which definitely serves to maintain it and also to attract new clients. Normally though, the insurance company will sell to you at a certain relatively high rate and it commits itself to maintain this for some years. This rate is usually called the bonus rate and it is normally set to pull clients towards signing up though it is truly beneficial to the client. Thereafter, the rate will change but this will be stated in the renew contract which comes into effect after the first few years lapse. The insurance then has the right to determine the rates which is always pegged to another external boy’s rates. This should not overly worry you though since in your contract there is a clause which states that the interest rate cannot go below a certain amount already indicated on the contract.

It is always possible to come across companies that use different rates on different premiums of the same annuity while other contracts have several already accumulated values that have been funded by different benefit options. You will be asked to pick on one choice that you want to attach to your plan.

Lastly when shopping for an insurance company, it is always important to try to establish if the company has other charges or if they have a special way of applying the rates. Sometimes you could end up exited that you have landed a great fixed annuity only for you to learn that the rate offered after all very many charges attached.

How Fixed Annuity Works According to Annuity Laws

Annuities have been with us since Roman times. A person used to give out a certain amount of money and receive a set annual income later in life when they were not as actively active. This served as a good insurance to getting old. The same practice goes on today. Today, it is defined as an agreement between one person and an insurance company or a body allowed by law whereby it receives a certain amount of money in lump sum in the individual’s earlier life to be distributed to the same in regular amounts or in lump sum in future. With time this has been modified to accommodate everyone, one can either give out an initial lump sum amount or be giving out little amounts of money to build up what he or she intends to receive either as a retirement income, benefits left to a surviving spouse or children or even a trust.

FindAnnuitiesThe underlying annuity laws in are defined by Internal Revenue Code (IRS) and the actual implementation and making of specific laws are made by the individual states. You will normally see that the annuity requirements in the different states varying from one state to another. The Financial Industry Regulatory Authority (FINRA) which is a non governmental body that regulates the insurance companies all across the country. One should always strive to verify whether an insurance company has been licensed and genuine with FINRA.

You always stand to benefit in numerous ways take up a fixed annuity plan. You might be in a well paying job currently but when you look further into the future, you see yourself in a much less paying job either due to economic regression or personal reasons. You can choose to have some money put in a fixed annuity plan now and receive it at that future time. Not only will the premiums paid to the insurance company not be taxed but they will be earning interest at a compound rate. When that future time arrives you can then receive the amount in lump sum or in installments thereby attracting minimal tax. There is no better way to save!

That part of your income which is used to pay for the fixed annuity premiums is recognized as savings by the law. The money invested into the annuity then attracts interest at a compound rate. Since the interest is not drawn immediately, it continues to compound and grow. At the time of drawing you will only be charged tax on the interest income and not the principal.

Fixed annuities are always a safe place to put your hard earned cash. The premiums paid to the insurance company are always invested very stable ventures. Some of the stable investments around include government bonds and blue chip bonds. They give stable and secure returns always.

In conclusion, you will be taking up an insurance plan for your retirement life by taking up a fixed annuity. A fixed guaranteed income will be flowing your way at your sunset days. Be safe and having a safeguarded retirement life is a dream for many.

Different Types and Classifications of Fixed Annuity

When it comes to fixed annuity, you must know that you as a buyer have two payment options. First, we have the immediate annuity where you will receive the income payment immediately you start the annuity normally within a month or one year from the date you purchased the annuity. Secondly, there is the deferred annuity which operates in a way that they will provide you with income payments at a future date and it is usually stated in the contract. It is actually a way of accumulating cash which is not taxable before the retirement. The money is usually received in a lump sum or they are paid in installments once the annuity matures.

Fixed annuity is a useful tool when it comes to financial planning especially when you are planning for retirement. If you are looking for a steady and a guaranteed income, fixed annuity is the way to go. However, it is always good to understand a fact before making any decision as to matters that are concerned with investment. If possible, look for a financial adviser to guide you on what to do. Make sure that you take a careful consideration before investing.

Apart from the two types of fixed annuity classified above, immediate and differed, fixed annuities can also be classified into joint and survivor annuity, equity-indexed annuity, annuity certain, joint annuity, life annuity and life annuity certain among others. The thing that differentiates these annuities is the duration of the payouts, the payment certainty, bonus stipulation, and the designated life on the contract.

The good thing about these types of fixed annuity is they pay a fixed dollar amount for the period of the investment which is a very appealing feature at the time of market volatility. They are similar to CDs and they give a guaranteed payment for the payout period. Fixed annuities do pay a minimum interest rate when the market is down and they give a bonus in market up years. This is important in the sense that it participates in market upswings and at the same time protects the principal of your investment.

Let’s discuss the differed and the immediate types of fixed annuity.  There is not so much difference between the two except that deferred annuity has an accumulation component of the front end. The funds are usually deposited in an accumulation account that is normally credited annually with a rate of interest. The amount that is in the accumulation account is not taxed until it is withdrawn hence giving room for faster growth. Deferred annuities are accumulation vehicles for those individuals who are seeking tax advantage.

The amount in the accumulating funds in case of deferred annuity can actually be converted into immediate annuity allowing the investors to change from guaranteed accumulation duration to a guaranteed income and this is beneficial in the sense that it extends the deferral of taxes throughout the payment period. In conclusion, immediate annuities are preferred for those individuals who want an instant source of income and the deferred annuities are for people who want to save some money for the future.

The Pros of Fixed Annuity on Your Retirement

Getting yourself a fixed annuity is a wise investment because it offers a wide range of benefits that may secure you a comfortable life after retirement.

1. Tax Deferral

One of the chief advantages of the fixed annuity is tax deferral. The client’s investment is exempted of any tax while it is still accumulating. Taxes are charged only upon the distribution of corresponding annuity income to the company’s clients. This means that your money may grow faster because of tax deferral.

2. Tax Reduction

Your annuity fund is not subject to taxation. By saving your taxable income into your annuity, you can reduce the taxes on your Social Security benefits. When invested in the annuity, the once taxable income becomes non-taxable.

3.  Contract Flexibility

Fixed annuities are flexible because certain types of annuities can be transformed into other types of annuities. For example, deferred fixed annuities can be transformed into life annuities that assure you of a fixed monthly income all throughout your life. When necessary, the annuity owners can also change their payment structures to fit their current needs and wishes. They can review their investment and append their contracts with additional safety features that will secure not just a fixed income for themselves, but also for their loved ones that they will leave behind upon their death.

4. Stability of Annuity Income

The principal, or the original amount of your investment in annuity, is protected. A lot of annuity owners consider this feature the most important because it guarantees that the money they have invested will not vanish very easily. Unlike other investments that are dependent on the present economy, it has a fixed interest rate. It is not affected by market downturns, economic crises, or periods of recession. Thus, even if the economic activity is reduced or even if the company’s investments in other ventures are unsuccessful, you will still receive the same rate of income because it is already fixed.

5. High Interest Rates

Compared to other investments and annuities, it generally offers a higher interest rate. The interest rate in fixed annuities usually falls in the 1% to 4% range.  Compared with the interest rate in money market accounts, this range of interest rate is way higher. Thus, it may give you a higher fixed monthly income than other ventures will.

6.  Easy Access

In fixed annuities, most companies allow you to withdraw a portion (usually 10% every year) of your account value with a withdrawal charge. When the withdrawal charge period expires, you can access your money and withdraw from your account at any time without withdrawal charges.

6. Probate Free Transfer

When the owner of the annuity dies, the full account value of annuity will be paid directly to the beneficiaries you have specified in your contract. Unlike other insurance-related assets and investments, it is not subject to probate. This allows your loved ones to save time and money. Aside from that, it also prevents them from undergoing through a stressful and lengthy process before they can get hold of the money that you yourself had invested for your family.

These chief advantages of the fixed annuity provides assurance to annuity owners that they may be able to live a comfortable life even after retirement. The contract is flexible and can be modified to fit the owner’s needs and wishes. Moreover, it may give them peace of mind because they have a fixed income that cannot be affected by sudden market downturns.

The bottom line? Fixed annuities are a dependable and stable investment that will high likely give you a steady source of income from the day of your retirement to the day you breathe your last breath.

Do you want to guarantee a reliable and stable income your you and your loved ones? Start now! Enter your zip at the top of the page and then answer some basic questions to find out your highest eligible rate.