FIXED ANNUITY INSURANCE

Fixed annuities help stabilize income from investments, and are most commonly used by people who are not fully participating in the workforce, are about to retire or have retired. Fixed annuity is an insurance contract in which the insurance company makes fixed dollar payments to the annuitant for the term of the contract, usually until the annuitant dies. The insurance company guarantees both earnings and principal.

Fixed annuities can be bought from insurance companies or financial institutions with a lump-sum payment (usually most of the annuitant's cash and cash equivalent savings), or they can be paid for on a periodic basis while the annuitant is working. The money that is invested in the annuity is guaranteed to earn a fixed rate of return throughout the accumulation phase of the annuity. During the annuitization phase, the money invested less payouts will continue to grow at this fixed rate. In some cases, however, annuitants don't live long enough to claim the full amount of their annuities. When this happens, they end up passing on the remainder of their annuity savings to the company that sold them the annuity. But whether the annuitant chooses to try to avoid this depends on the kind of policy chosen.

Fixed annuities are a powerful vehicle for saving for retirement and guaranteeing regular streams of income upon retirement. They are often used for tax deferral and savings. At the same time, annuities can be very tricky to manage for maximum returns since the cost of insurance features can eat into the return you get on your initial investment.

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