A guide to fixed annuities
Annuity means depositing a certain amount at short intervals, such as yearly, monthly, or quarterly, or you can make a lump sum deposit in order to generate some steady income. You will sometimes be able to earn the returns immediately, and sometimes it may take a certain period of time. You need to choose the best fixed annuities to make an investment and generate a steady income. Fixed annuities mean that the deposit is made for a fixed period of time and a minimum interest is fixed at the time of making the contract. You can choose from a number of companies that are available in the country.

What are fixed annuity plans?

• A fixed annuity means that you have an option to deposit in a lump sum, or you can make contributions as required in the contract.
• The insurance companies will guarantee a fixed interest rate to the person taking a fixed annuity.
• The principal amount that is invested is also guaranteed.
• The contribution is made for a fixed period of time.
• You need to pay a penalty in case of early withdrawal of the money.
• It is usually 10 percent of the amount invested in fixed annuities that is charged as the early withdrawal penalty.

What are the key features of fixed annuity plans?

• From fixed annuities, you will be able to yield high-interest rates as they are invested in high-quality government and corporate bonds.
• Fixed annuities guarantee a minimum interest rate, and even in the case of declining rates of interest, you will still be able to get the minimum interest rate, as that is fixed at the time of investment.
• Fixed annuities can be really helpful if you are in a high tax bracket, but once withdrawn, they will be taxed as a normal income.
• The payouts are guaranteed whenever needed, as you can convert them to an immediate annuity anytime.
• The safety of the principal amount is always guaranteed by the insurance company.

What are the benefits of fixed annuity plans?
There are numerous benefits of fixed annuities:

• They are safe, and you will be guaranteed a fixed return over a fixed period of time. This means it is a good and safe way to increase your money.
• You will not be taxed on the interest rate that you earn out of the principal amount. This means you are able to grow your money faster, as you are not paying tax on the interest amount.
• A bond of a longer period will yield high-interest rates as compared to a bond with a shorter period.
• You need not worry if you die when your annuity is still live, as the entire money would be transferred to the beneficiary stated by you at the time of making the contract. It is not going to be part of your estate.
• You can break the contract anytime with a small amount as a penalty for breaking it early.

Are there any risks involved with fixed annuity plans?

• When you are going for early withdrawals, you need to pay a penalty of 10 percent. This is something that can make you lose some money. Along with the penalty, there are companies that take away the interest rate paid for that year.
• It is a tax-deferred fund and hence you will not be taxed on the interest. However, when you withdraw some part of the money, you will be taxed for it.
• Returns are uncertain after the first year.
• When the yielding curve is low or flat, you will earn really low.
• The principal amount is under the protection and guarantee of the insurance company, but that is just as long as your insurance company is safe. If the company goes bankrupt, you will lose your money.

What are the best companies in the country that provide fixed annuities?

• Pacific Life
• Symetra
• Midland National
• Allianz
• Great American
• Integrity