A traditional fixed annuity provides a guaranteed interest rate for a specific number of years. Fixed annuities offer fixed interest rate periods, typically over one, three, five, seven or 10 years, as well as a variety of annuitization payout options — including the option for guaranteed income for life.
With a fixed annuity, you defer paying taxes on the interest earned in the contract until you begin taking withdrawals or receiving scheduled annuitization payments. Once you begin withdrawals, they will be taxed as ordinary income and, if you take withdrawals prior to age 59 1/2, a 10 percent federal additional tax may apply. Tax deferral may allow your assets to grow faster than in an alternative financial vehicle that is taxed annually.
The fixed annuity can help you conservatively accumulate assets to help cover fixed living expenses in retirement.
Is a fixed annuity the right option for your financial plan? Our expert financial planner can help you find the answer. Contact us today!