Look forward to your future knowing that you can protect/put aside your retirement savings and earn interest on it until you need it. One option is to purchase a fixed annuity.

What Is a Fixed Annuity?

A fixed annuity is an insurance contract that guarantees retirement income payments. With a fixed annuity contract, you make one or several payments to the annuity provider, which in turn promises to provide you with a fixed stream of income during your retirement through a process called annuitization, regardless as to how the markets are performing.

The period you make contributions to a fixed annuity (or simply earn interest if a lump sum) is referred to as the accumulation phase, and the period in which you make withdrawals is called the distribution phase. For the distribution phase, you can choose to receive guaranteed payments for a set period of years or for the rest of your life, depending on your policy.

There are two basic types of annuities: deferred and immediate.

With a deferred annuity, your money is invested for a period of time until you are ready to begin taking withdrawals, typically in retirement.

If you opt for an immediate annuity, you begin to receive payments soon after you make your initial investment.

The deferred annuity accumulates money while the immediate annuity pays out. Deferred annuities can also be converted into immediate annuities when the owner wants to start receiving payments.

What Are the Benefits of a Fixed Annuity?

Fixed annuities can provide protected lifetime income and security to your overall retirement plan, including:

  • Tax-deferred growth
  • Guaranteed interest earnings
  • Access to your money
  • Protection from market ups and downs
  • Guaranteed beneficiary benefit that avoids probate

With an annuity, you’re effectively creating your own pension plan for retirement!