Fixed annuities offer numerous flavors of enticing features to the market. These features vary depending on what type of fixed annuity is offered and depends on what the company’s deals are.
All fixed annuities are packed up with benefits and advantages depending on what kind of annuity is bought. One of the commonly shared features of all fixed annuities is these are all tax-deferred. There are no income tax requirements until the withdrawal of the annuitant. This feature serves a great deal to many annuitants since they are able to save up their money with no taxes abound to come. Who would want to be taxed anyway? It is a great way to save the money you could have paid in the taxes.
Fixed annuities usually run from 1 to 15 year term. The number of terms depends on the annuitant. If he or she decides to get another if ever his or her annuity contract is terminated, he or she can reapply for another term.
Death payout is also one of fixed annuities’ highlights. When the annuitant dies, his or her spouse or any beneficiary will receive an amount of money for a given span of time signed upon on the contract. Life annuities give this kind of service to the investors. This is a great way to insure the life, specifically the financial stability of the left living relatives or family members of the annuitant.
The withdrawal privileges offered in fixed annuities are also flexible. Immediate fixed annuities which allow the annuitant to withdraw money from his or her account after one year of investment give a 10% withdrawal allowances annually. An annuitant can also withdraw before his retirement period. This is not really recommended by insurance companies because the Income Revenue Service (IRS) will give the annuitant a 10% penalty. Nonetheless, after the retirement period of the annuitant, withdrawals come up free of charges and fees.
If an annuitant also desires to take part or all of his or her annuity values, withdrawals charge also known as surrender charge will be imposed. Surrender charge may end at a specific time specified in the contract. Again, it all depends on the decision of the company. So before someone buys an annuity, it would be really helpful to check the end date of surrender charge because some companies have surrender charges that last forever.
Also, the fixed annuities’ payments could be in a lump sum form or could be periodic. Depending on the type of fixed annuity bought, the payment options vary. Deferred fixed annuity allows an annuitant to receive payments after his or her retirement which leaves him or her with a lump sum of money. Immediate fixed annuity, on the other hand, offers to pay the annuitant periodically.
Another feature of all fixed annuity is that there is a guaranteed interest rate provided for as long as the annuity contract lasts. Fixed annuity contracts provide minimum interest rates. No matter what happens in the market, there is a guarantee that the annuity of one person will still continue to grow.
To clear things regarding rates, rates vary from fixed annuity to another. The guaranteed rates the insurance companies offer could also be not the guaranteed rates the annuitants thought of. Meaning, some insurance agents advertise having high rates when in fact these rates last for only the first few years of the contract without explaining why situations like that happen. They should at least explain to the prospective annuitants the different rates the company offers at that time like current rates and bonus rates. Nevertheless, higher rates or not, there are still rates available for the annuitants to benefit from.
The above mentioned features do not necessarily apply in a single type of annuity or a single company. However, what are listed above are the commonly used features of fixed annuities.
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