Fixed Annuities: How To Choose The Right One

Fixed annuities vary in benefits, accumulation rates and payout rates. That\’s why you need to seek outside help before you sign on the dotted line for any investment product. The selection is vast but there\’s a perfect fixed annuity for you.

Often people talk to their friends to find financial products. While this is a great way to learn about innovations in investment products or even find a good financial advisor, it\’s not the best way to find a fixed annuity. Each person has different needs and yours may not be the same as your neighbor, family member or friend. Changes also occur in the industry daily.

A person who puts in a principal during a period when the interest was sky high, may be getting a bigger sum as opposed to people who invested their money during a lower interest rate period. The companies alter the returns some times and as a result, what you get every week may change accordingly.

Fixed annuities are great assets for those that want security, whether they take an immediate income or simply allow the money to accumulate interest. The steady growth with no risk of principle loss is often a draw for people with an aversion to risk or in their senior years with limited time to recapture any loss in the market.

Fixed annuities, similar to the banks, offer warranties supported by the government. If any company in any particular state happens to face financial trouble, they ensure that the policy holders\’ do not lose their assets, by selling proportionately pooled funds. So, as you can see the State Guarantee Funds carries out the same functions like the FDIC, making fixed annuity the most suited for people on the lookout for safe means of investing their money.

While your friend might suggest a company with a high rate of return on their fixed annuity, you also need to look beyond just the return to see if the product is right for your situation. Do you need access to any of the funds? Do you have an adequate emergency fund? When will you need the money? These questions and more need answering before you invest your funds.

All annuities have a duration period of surrender and this duration is identical to locking your investment in a CD. Suppose some contingency arises as a result of which you have to draw the amount that you invested before the surrender period, you are beholden to pay a price for it. But, suppose you plan to go on with the contract after the surrender time, then you do not have to go through the ordeal of procuring a new CD. Similarly, there is no necessity of waiting, as it will be offered to you at any time you want it, which implies that a new surrender period is not restarted.

There are a lot of people for whom the money that they invest is never made use of and for such people; the term of surrender does not create any trouble. But for people who have to use to money when a contingency arises, the penalty free sum is an important criterion. Similar is the case with persons who require sums at fixed intervals. The most important thing that you should look into is what exactly your requirements are before you put in your money.

John C. Ryan analyzes the merits of a fixed annuity as part of a proper retirement investment portfolio. Fixed annuities are a low risk investment, tax deferred as a way to save for retirement.