Fixed annuities provide the combination of a guaranteed stream of income and stable principal value. Issued by insurance companies, annuities are recommended for long-term investors who want their money to grow and compound tax-deferred with minimal investment risk.

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Fixed annuities can be a great choice for a variety of investors, especially:

• The conservative investor who does not wish to participate in the fluctuating equity market.
• The pre-retirement investor looking to utilize tax-deferral to maximize competitive fixed rates, over time, when compared to other fixed rate products.
• Any investor looking for a guaranteed income rate.

Fixed annuities pay a guaranteed fixed percentage rate of return, are guaranteed by an insurance company, for a specified period of time (usually between one and 10 years). As with all annuities, fixed annuities offer investors the benefits of tax deferral.

Fixed annuity features include:

• No contribution limits - you may contribute as much as your want.
• Principal and minimum interest rates that are guaranteed by the issuing insurance company.
• No up-front sales charges - all of your money goes to work for you, right away.
• Possible reduction in taxes on Social Security benefits.
• No surrender charges when holding periods are met.
• Assets avoid probate.

Is A Fixed Annuity Right for You?

A fixed annuity has many advantages, like tax-deferred growth and the option of guaranteed income for life, but how do you know if a fixed annuity is right for you? Consider the following scenarios:

• Are you currently planning your retirement, nearing retirement, or already retired?
• Are you looking for a way to round out your investment strategy?
• Are you looking for a higher return on your money?

An Additional Source of Income for Retirement
However you plan on funding your retirement - through investments, selling a home, pensions, IRAs, Social Security, payouts from employer-sponsored plans, such as 401(k)s - a fixed annuity could be a wise choice. Think of a fixed annuity as a way to protect yourself if you happen to outlive your other assets. Besides lifetime income options, other key features include family protection through death benefits and nursing home riders. Guarantees are based upon the claims-paying ability of the insurer.

The Advantage of Unlimited Contributions
Perhaps the most attractive feature of a flexible premium fixed annuity is the lack of annual contribution limits such as those applying to IRAs and 401(k) plans. Although a tax deduction is unavailable for the money deposited in a traditional fixed annuity, all of the earnings accumulate tax deferred until they are withdrawn. (There is a 10 percent IRS tax penalty for withdrawals prior to age 59½.)

You can purchase a fixed annuity with a single lump sum, with periodic fixed sums, or for variable sums at irregular intervals. This flexibility allows you to tailor purchases to the availability of funds for investment.

Rounding Out Your Investment Strategy
A fixed annuity generally provides a predictable income stream. Because you earn a rate of return that's fixed for a particular period, there's no need to worry about the day-to-day fluctuations of the investment markets. Fixed annuities are not FDIC-insured, so it is wise to get to know the insurance company's financial position. A fixed annuity may be more appropriate if you're a conservative investor with a low risk tolerance who requires safety of principal and predictable investment results.

Depending on your circumstances, a fixed annuity can be a tool to help supplement your retirement plan or round out your investment portfolio. The flexibility in plan options means that you have the potential to design a strategy that best suits your needs.