What is a Fixed Annuity?
The fixed annuity is a popular way to save money for retirement without taking a lot of risks. Here's a look at fixed annuities like the equity indexed annuity and other annuity options.
An annuity is an investment-based income source where you receive regular payments on a yearly or quarterly basis. With a fixed annuity you will always receive the same payments, so they are much safer than the variable annuity where your payoff fluctuates with your investment earnings.
Most people who go with a fixed annuity want a safe, secure way to save for retirement. They do not want to deal with the fluctuating market and payments that come with the variable annuity. Yet, they also give up a lot of potential money when they go with this fixed option.
A variable annuity does fluctuate more, but it can also deliver much higher payments when the market is good. Those who have more time before they retire or have other sources of retirement income may go with a variable annuity and take the risk to earn more money.
For those who want a secure income stream that will not have that level of risk, the fixed annuity is a good option. Many people who go this route want the sense of security that comes with the fixed payment rate.
A popular fixed annuity that offers the best of both worlds is the equity indexed annuity, which provides downside protection with the upside of the markets. If you are considering an equity indexed annuity you should proceed with caution, however, as some are better than others.
For anyone who will be depending exclusively on this one retirement fund for income in their later years, the fixed annuity is a much safer way to go. Many of the people who choose this type of retirement investment also tend to be those that just aren't up for taking much risk with their money. That group continues to grow right now, as more people are interested in guaranteeing money for retirement than getting as much as they possibly can.
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If you are considering a fixed annuity it is important for you do some homework. By doing some research you can find the top rates, avoid poor performing equity indexed annuity products and so on.