Fixed Annuities: Guaranteed Rates of Return
No contribution limits. A guaranteed fixed rate of return. Potential Tax-deferred earnings. Find out about fixed annuities for retirement here.
Although it may be true that current workers lack full confidence that they will have enough money to retire comfortably—according to some professionals—it doesn’t mean there aren’t some good strategies out there to help maximize income over a period of years.
Many workers take advantage of employer-offered retirements plan, such as the 401(k). And some also open individual retirement accounts (IRAs). These encourage people to save and to take advantage of tax benefits: they are both great ways to sock away money for retirement.
But there are limits to the amount of money you can contribute yearly to those plans. And it may be that when you sit down and add up what you think your retirement expenses will be and then add up your income stream for retirement, you will find that your income won’t be sufficient. Working longer is one route that many people take. Another is to put money into a fixed annuity (starting as early as possible), which grows over time by paying a guraranteed interest rate. The earnings are tax deferred, and income paid to you according to a variety of different plans. The earnings on the fixed annuity are only taxed when the money is taken from the account. Unlike some retirement plans, there are no limits to how much you can contribute to an annuity.
A fixed annuity is an insurance contract. Generally annuities have contract limitations, fees, and expenses. Most annuities have surrender charges that are assessed during the early years of the contract if the annuity is surrendered. Withdrawals of annuity earnings are taxed as ordinary income. Withdrawals prior to age 59½ may be subject to a 10% federal income tax penalty. Any guarantees are contingent on the claims-paying ability of the issuing insurance company.