Fixed Annuities | Up North Retirement

A fixed annuity provides a fixed rate of return to the investor for a specific period or for the lifetime of the owner, so here’s what you need to know about them. 

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Different annuities have different rules that govern how you can contribute to them, how your contributions are managed, and when you can withdraw your funds. Fixed annuities guarantee a certain rate of interest during what is called the accumulation phase. Other investment vehicles rely on things like the performance of a market index or other assets.

In most cases fixed annuities can be distributed in a lump sum payout after the surrender period of the contract, or in distribution dictated by the account owner.

Distributions do not have to be taken and the owner can allow the account value to continue to grow for the lifetime of the contract.

Fixed annuities allow your income to grow tax-deferred. As you earn interest on the premiums you pay into the account, your distributions will be taxed based on an exclusion ratio. This ratio is defined by the account holder’s premium payments and the gains from interest gained during the accumulation phase. To learn more about the tax status of fixed annuity products, you should speak to a professional.

Benefits of Fixed Annuities

Fixed annuities offer predictable investment returns that are easy to calculate into your retirement strategy. This is because the rates for these annuities are derived from the yield of the insurance company’s investment portfolio. These investments are mostly made into high-quality bonds, so your money is typically safe and in position to appreciate steadily.