Top questions about fixed annuities
When you think about investing for retirement, what are you most interested in?
Are you concerned about protecting your principal, so you can avoid market volatility?
Maybe you’re interested in guaranteed growth, so your investment can combat inflation.
Or maybe what’s most important to you is leaving a legacy, so you can continue making an impact on your loved ones even after you’re physically gone.
If any of these resonate with your retirement goals, it’s worth asking your financial professional about fixed annuities.
What is a fixed annuity?
A fixed annuity is a type of annuity that allows you to avoid market losses and assure a return on your investment with a guaranteed* interest rate. It does this by having a fixed rate that adds interest to your annuity's contract value through the life of the annuity contract. Compared to other retirement tools that may not provide guarantees, a fixed annuity can help your much-needed retirement income grow at a better rate than you’d find elsewhere.
Are fixed annuities taxable?
Yes, fixed annuities are eventually taxable, but not until you collect a payout or make a withdrawal. Fixed annuities utilize the power of tax-deferral,† letting you keep more of what you earn as it grows. This type of annuity comes in many forms such as deferred, immediate, and multi-year—each of which refer to the contract's time frame for payouts. Many fixed annuities also offer a standard death benefit to see that your legacy wishes are honored.
Are fixed annuities a good investment?
Fixed annuities may not be suitable for everyone’s retirement situation, but they are for some, and for many people they can offer a level of stability.
Running out of money is consistently cited as a top concern among retirees. Unpredictable stock market volatility only exacerbates this fear. Plus, the value of a retirement nest egg can fluctuate significantly depending on how much is allocated to stocks.
A fixed annuity, however, can help alleviate some of the fear of losing money because it does not involve an investment in the stock market. Instead, the principal is protected with a guaranteed interest rate backed by an insurer, like Jackson.
Here are some benefits of a fixed annuity:
- Moving your money out of the market and into a fixed annuity can help keep your principal protected from market downturns.
- A fixed annuity may help your money keep up with the rate of inflation.
- A fixed annuity can be a predictable way to diversify your retirement income.‡
Here are some downsides of a fixed annuity:
- Most fixed annuities require a surrender period, which means you can't access your money for a set period of time without paying a fee.
- Liquidity is always important, so if you don't have enough accessible savings in case of emergencies, purchasing an annuity may not be advisable.
Fixed annuity rates
Low-interest rate environments can be a real challenge for retirees with fixed incomes. When yields on traditional fixed-income investments are lower than expected, your spending power declines, and anxiety rises.
But remember, a fixed annuity can help eliminate concerns about a reduction in income because it guarantees your principal’s growth. Check with your financial professional to get the current rates on fixed annuities.
Fixed annuities and leaving a legacy
As you think through how to plan your estate, a fixed annuity can help you address your desire to leave something of value to your heirs after your death. With a standard death benefit, your beneficiaries will receive a payout equal to the annuity's accumulated value if you die before distributions begin.
Payments are made directly to your beneficiaries, avoiding the costs and delays of probate. And there are no withdrawal charges on death benefit payments.
To learn more about fixed annuities, simply schedule a call or meeting with your financial professional to discuss if this investment vehicle is right for your retirement plan.