Fixed annuities are given by insurance companies and financial institutions. Direct sellers on the internet, brokerage firms, banks, and independent advisers are offering fixed annuities for sale. These days it is a vast and an increasingly competitive market place. Many companies offer annuities and having choices is the best thing because you look for the company that offers excellent annuities. You have to purchase them with a lump sum payment and you will have to pay them on a periodic basis. During the accumulation phase, the money that you have paid to the insurance company will earn a certain fixed rate of return.
Bank CDs and fixed annuities compete in the same rate market over time the yields experienced by annuities has exceeded that experienced by bank CDs. Fixed annuity allows you to set aside some money in order to increase or for it to grow and you will not pay taxes on such growth. This will lead to a stream of income payments in the future and those payments will be taxed as ordinary payments. Note that taxation is done during the time of withdrawal or payment.
Management services and annuity fees are the source of money for insurers when investing on fixed annuity. They retain anything that is on top of the payments that they guarantee you. They will also retain them funds that remain on your annuity contract if any incase of your death. However, they do have payment obligation to your heirs incase of your death, which they must settle before taking any remaining funds. There is the fixed annuity and the variable annuity all of which are under differed annuity. If you need a fixed series of payment then the fixed annuity is the right choice of investment for you. You will be provided with a specific payment by your insurer. You need not to involve yourself in finding out your annuity funds are invested or how payments are arrived at because you will receive fixed payments.
Annuities assure you that you will not receive a lesser amount than that of the premiums that you have been paying and they are a safe for investment purposes. They possess the feature of a life insurance protection. Apart from the fixed and variable annuities, we also have the equity index annuity. The insurance companies that issue fixed annuity usually guarantee it but they are not insured by the government. That is why they are considered as a safe investment vehicle.
The company that issues them also promises to pay a guaranteed life income for your life as an annuitant. They allow for an accumulation period where the lump sum is allowed to grow over time and then it is converted into income. There is an accumulation period where the premiums are credited with interest and the interest accumulates over the years. There is the current rate and the guaranteed minimum interest rate under the fixed annuity.