What a fixed annuity is
A fixed annuity is a contract with an insurance company. In exchange for premium, the insurer credits interest according to the contract and can provide systematic or lifetime income options. Guarantees depend on the claims-paying ability of the issuing insurer.
Types
Traditional fixed annuities credit a declared rate. Multi-year guaranteed annuities provide a guaranteed rate for a selected term. Fixed indexed annuities credit interest using an index-based formula but do not directly invest in the stock market.
Tax treatment
Growth is generally tax-deferred until withdrawn. Withdrawals are usually taxed as ordinary income to the extent of gain. Withdrawals before age 59½ may also be subject to a federal tax penalty unless an exception applies.
Liquidity and surrender periods
Most annuities impose surrender charges for withdrawals above any free-withdrawal amount during the surrender period. Some contracts include market value adjustments. Emergency access, required minimum distributions, and nursing-home or terminal-illness waivers vary by contract.
Income options
Income can be taken through withdrawals or annuitization. Lifetime income riders may provide a guaranteed withdrawal benefit for an added cost. An income-base value is typically not the same as cash surrender value and is generally used only to calculate rider income.
Suitability
An annuity should fit your age, liquidity needs, time horizon, tax situation, income goals, and existing assets. Compare surrender terms, renewal rates, caps, participation rates, fees, death benefits, and insurer financial strength.
Next step
A personalized comparison can show which carriers and policy structures may fit your age, health, goals, and budget. There is no obligation to apply.