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How Fixed Annuities Work

how fixed annuities work

One kind of an annuity is a fixed annuity. With this, the insurance company makes fixed amount of interest and income to you until a couple of years or throughout your entire lifetime. This kind of retirement plan allows you to earn an income even without going to work on an extended period of time.

Immediate or Deferred

A fixed annuity can be deferred or immediate. With a fixed immediate annuity, you receive your income after you have purchased your annuity. This would be advisable if you are already in your retirement when you buy your annuity. In this way, you could have money immediately to pay for your expenses without having to touch your other savings allotted for other things.

However, with a fixed deferred annuity, you will receive your income after a set date which will be arranged when you buy your annuity. This is usually done by people who still have years before approaching retirement. This is one way to save for your future so you know you’ll have resources when you get out of work.

What Makes It Appealing?

The benefit of having a fixed annuity is mainly having guaranteed money and a rate of interest when

you receive your income in the future, usually in retirement. So, by buying annuity, your money already increases compared to the initial amount you have. And by the time you receive your stream of income, you would have the same and fixed interest as the rest of your income will have. This would help you have a constant and stable amount of money as you live.

Another good thing about annuities is that they don’t have a limit on how much you could put in and invest in your account. This could help you allot more for your retirement to support your lifestyle and receive a sufficient amount of money you will need in the future.

Also, it is a safe kind of an annuity compared to the others. With a fixed annuity, the income that you will receive is constant – the principal and the rate of interest you and your insurer have agreed upon. The only thing that would endanger your money is if the insurance company you have invested in goes bankrupt. So, you also have to choose your insurer carefully so you’d know that your money will be managed properly and you will get what you have signed up for.

Category: Credit

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