Fixed Annuities are Alternatives to CDs

Considering a fixed annuity? Start by recognizing what matters most to you and uncovering options that can support your long-term plans.

Are you tired of only earning 3-4% on your money with a CD and paying taxes on that growth? Do you prefer the freedom to access your money without locking it away for several years? If you answered yes to either of these questions, it’s the perfect time to explore the benefits of a fixed annuity.

What is a fixed annuity?

A fixed annuity delivers guaranteed interest and the option for steady income – whether for life, a specified number of years or a combination of both.

Is a fixed annuity a secure choice?

Yes. Look for one that includes a built-in return of premium feature. This adds an extra layer of protection – ensuring you receive at least your original deposit back if you cancel during the surrender period, provided you haven’t taken any withdrawals.

How do I know if a company is financially sound?

Check the company’s financial strength rating with A.M. Best Co., an independent provider of insurance ratings since 1899.

What are the tax advantages in a fixed annuity?

There are two main tax advantages:

1. Enjoy tax-deferred growth. Unlike CDs, which are taxed every year, fixed annuities let you postpone taxes until you begin withdrawals.
2. Benefit from potential tax deductions. Add an IRA endorsement and your contributions may qualify for a tax deduction.

Do I have access to my money?

Yes. Some fixed annuities may charge a penalty, or surrender charge, if you withdraw money early or cancel the contract. Choose one with a return of premium feature, which typically allows you to access up to 10% each year without a surrender charge.

What happens to my money when I die?

Upon death, proceeds typically bypass probate and are paid directly to your named beneficiary. Consult your tax adviser or attorney for estate planning advice.

Is a fixed annuity right for me?

State-specific suitability rules require your agent to review your financial situation before determining whether an annuity is in your best interest. Take time to assess your goals and understand all available options before making a decision.

How do I purchase a fixed annuity?

Contact your local independent insurance agency for more details.

This loss control information is advisory only. The author assumes no responsibility for management or control of loss control activities. Not all exposures are identified in this article. Contact your local, independent insurance agent for coverage advice and policy service.