Fixed annuities are essentially CD-like investments issued by insurance companies, not banks. These are (ROP) return of principal annuities. A fixed annuity is a contract between you – the annuitant – and an insurance company, who by contract promises to pay you a certain amount of money, on a periodic basis, for a specific period. A fixed annuity has maturity dates which can be as short as 3 years and as long as 10 years.
Fixed Annuity Can Offer:
Fixed Rate of Interest
Income Options Now or Later
Shorter Term Maturities 3-10 Years
At maturity, the insurance company will return the original principal (ROP) back to the owner along with the interest for that specific time frame. Like CDs, they pay guaranteed rates of interest and in many cases higher than bank CDs. Fixed annuities par guaranteed rates of interest, which makes them appealing to investors wary of the stock market’s ups and downs. What also makes fixed annuities appealing are their low investment minimums and the fact that the interest paid by the insurance company is tax-deferred unlike a CD bank, therefore the individual who owns the fixed annuity does not have to pay taxes on the interest until the money is withdrawn from the fixed annuity.