Fixed Income Annuities Can Offer Certainty In An Uncertain MarketThe basic definition of a fixed annuity is that there is an investment contract between the investor and the insurance company, where the investor receives a fixed income from the insurance company over a period of time. The amount paid is based on the value invested; hence the industry term fixed income annuities. It is not surprising that some investors find this type of income vehicle confusing if the terms are not properly explained. Insurance brokers must do a good job of explaining the product as well as selling it to avoid potential lawsuits in the future. Providing annuity quotes before the investor signs on the dotted line is a way to avoid such havoc.
The types of annuities may vary. There are some annuities where payments are for a set period of time. Others are dependent on an individual’s life span. These are known as deferred or immediate. The interests of the individual investor will determine which one is selected. Annuities can provide retirement income. If an investor has an immediate annuity, payment from the insurance company is due either in full on a set date, or paid out monthly, beginning one date from when the contract was purchased. A deferred annuity is when the fixed annuity is purchased over a period of time, not in one payment.
Reaching out to a financial advisor before selecting an annuity is the best course of action. They can explain the differences between a life annuity; joint annuity; what lump sum factoring means; an equity indexed annuity, and others. An advisor can also explain the disadvantages that come with an annuity. The recurring stream of income may also bring steep penalties if you later decide you want a different investment strategy. There may also be penalties if you want your money sooner than the contract date.
Other than providing stock retirement options, fixed income annuities come with several advantages. One of the most appealing is the guaranteed dollar amount received, regardless of market volatility. Many investors have watched their portfolios on a roller coaster ride recently, so having some type of stability is soothing to the nerves. |
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