Fixed Annuity

If you are interested in making your money grow over time, you
should know about an investment instrument called fixed annuity.
Fixed annuity is an investment option offered by different
insurance companies. There are several other variations of
annuities like variable annuity and indexed annuity but fixed
annuity remains one of the most popular choices for individual
investors. Annuity is, essentially, a contract between an
investor and insurance company. The insurance company is
governed by the state and has to follow certain regulations.
There is also a tax deferment component that is governed by the
Internal Revenue Code.

So what is the fixed annuity and how does it differ from other
types of investment instruments? The fixed annuity is an
investment vehicle that allows the investor to receive a stream
of payments over the life of the annuity. The main
characteristic of the fixed annuity is the fact that that the
interest rate that the investor earns over the life of the
annuity is fixed. This can be considered as an advantage or
disadvantage depending on the situation and current economic
conditions. One of the main reasons why fixed annuity is used is
to provide the fixed retirement income when certain fixed
payouts are made on regular basis.

The guaranteed interest rate could be set for a life of the
annuity (the contract term) or for some other fixed period of
time. For example, a fixed annuity could have a fixed interest
rate for five years and after that a new fixed rate is set for
the next five-year term. Many interment professionals would
compare fixed annuity to the Certificate of Deposit. However,
annuity is not covered by federal deposit insurance. Another
important fact about annuities is that they usually provide the
opportunity for tax-deferred savings. In other words the taxes
are only paid when the money is taken out, not while they grow.