Fixed Annuities

Fixed annuities are ordinarily used by people who are not fully participating in the workforce, are about to retire, or have retired. Fixed annuities are insurance contracts that offer the holder a set amount of income paid at regular intervals until a period has ended or event has occurred. The money that is invested in a fixed annuity is guaranteed to earn a fixed rate of return throughout the accumulation phase of the annuity. Put another way, the insurance company guarantees that your money will earn a certain return during this accumulation phase. During the annuitization or payout phase, the money invested less payouts will continue to grow at this fixed rate. The insurance company also guarantees that dollar amount of the periodic payments that you will receive.

The two main types of fixed annuities are life annuities and term certain annuities.

• Life annuities pay a predetermined amount each period until the death of the annuitant.
• Term annuities pay a predetermined amount each period (usually monthly) until the annuity product expires, which may very well be before the death of the annuitant. In a term annuity, the outstanding balance often reverts to the seller if the holder dies before the end of the term.