In Annuity contracts there are two parties are involves the insured party and the insurance company. The insurance Company’s are known for offering guaranteed distribution of income for a certain time until when the person(s) mentioned in the contract dies or the final date mentioned in the contract. For insurance companies, fixed annuities are important as savings account. You purchase the annuities, it is invested for you, and your fixed annuity will accumulate interest as the year’s passes until you reach the payout date.
In the US, there is type of fixed annuity, which is known as the fixed indexed annuity that came into the scene in 1995 also known as the Equity-Indexed Annuity and they have features of both variable deferred annuities and fixed annuities. In the US you can benefit a lot with deferred annuities in that the taxation of all capital gains and the ordinary income is usually deferred until one withdraws. This will allow more money to be used while at the same time the savings are accumulating which will increase the returns. There is one limitation in the sense that when the amounts are withdrawn the interest rates are taxed as ordinary income.
In the US, the issuance of annuity insurance is done by Life Insurance Companies only but the private annuity contracts are sometimes done by arrangement involving the donors and the non-profits in order to reduce the taxes. The body that regulates the variable annuities is the Securities and Exchange Commission. The Financial Industry Regulatory Authority is the body that oversees the variable annuities.
Fixed annuity is one of the types of deferred annuity the other one being the variable annuity. When looking for a fixed annuity the factors that you must take into account includes the best interest rates. Individuals go for fixed annuities because of their competitive fixed yields because they are a security. You will find out that most of the fixed annuities have a guarantee rate that has been set for a particular period and when the period expires, the rate is adjusted.
During the fourth quarter of 2009, the sales of fixed annuity in the US continued falling to $19.6 bn and it was 43% lower than 2008 final quarter. It was the slump in sales in the second half of 2009 that led to the end of the time of exceptional growth in the market. Today annuity is referred to as immediate annuity. In order to distribute the savings with a tax deferred growth factor, immediate annuity is being used. It is also there for purposes of providing pension income. If you want to accumulate your funds free of capital or income gains capital, fixed annuities are there for you.
If you need money for your retirement life style, the best financial tool to use is a fixed annuity. It is the life insurance companies that usually issue them and they are considered a very important part of a financial strategy. Before taking them, ensure that you understand the charges and ensure that the insurance company is the best.