What Is a Fixed Annuity?
July 21, 2020 by David Rodeck
A fixed annuity provides guaranteed retirement income payments. With a fixed annuity contract, you make one or several payments to the annuity provider, which in turn promises to pay you a fixed return on your contributions, no matter how markets are performing. Annuities can be relatively illiquid investments, however, and some fixed annuities charge high fees. Here’s a deeper look at the basics of what an annuity is and how fixed annuities compare to the other types of annuity contracts.
How Does a Fixed Annuity Work?
A fixed annuity provides a guaranteed return on contributions you make as a lump sum or over a set period of time. The period you make contributions is referred to as the accumulation phase, and the period in which you make withdrawals is called the distribution phase.Fixed annuity contracts are sold by insurance companies, banks, broker-dealers and other financial services companies.
Wink’s Note: Indexed annuities are not “riddled with underlying fees.” On the “Predictability” front, I would like to clarify that fixed annuities do not GUARANTEE a set rate of return, unless they are MYGAs. In other words, YES, some insurance companies do change the annuity rates in years 2+!
Otherwise, a pretty good article on fixed annuities!