How to Balance Growth and Protection with Fixed Annuities?

Any kind of financial investment involves a certain degree of risk. If you are looking for a comparatively less-risky and straightforward financial growth plan, fixed annuities would be the way to go. These annuities come with predictable interest rates and fixed income.

Depending on the type of annuity, the payouts could be immediate or deferred. In addition, the payments are not linked to the performance of your portfolio or any other underlying investment.

The article will look at different types of annuities under the fixed category and why they should be your choice of financial instrument for growth and protection.

What are Different Types of Fixed Annuities Offered?

Insurance companies offer several types of annuity plans depending on the term, payout period, and rates. The type of annuity plan you invest in depends on the goal you want to achieve.

For example, if you intend to secure lifetime income, there are plans available to provide income for the remainder of your life. Similarly, there is a fixed period annuity, in which the payment is made for a specific period, such as ten years.

Then there are deferred and immediate annuities. You could receive the payout after the deferred stage is complete or start receiving payouts after a certain period, such as a year or even a month.

How do Fixed Annuities Help Balance Growth and Protection?

 

Guaranteed Minimum Interest Rate and Predictable Income

You get a guaranteed minimum interest rate at the time of investing. The interest rate will not be affected by the performance of the insurance company. You will receive all details such as interest rates, payments, and payout periods well in advance.

Irrespective of the type of annuity plan you invest in, be it a single premium immediate or multi-year guarantee annuity, you will know the monthly payments and the date you will receive your principal amount back. With such information handy, you can better plan your retirement. 

Low-Risk Financial Product

Compared to a variable annuity, the interest credited in a fixed annuity does not depend on underlying stocks or investments. Therefore, when planning for retirement, you will get a reliable source of income stream and not one at the mercy of the stock market.

Easy to Understand

If you are new to financial investment, you must first understand what sort of product you are investing your hard-earned money in. A fixed annuity is the most simple and easy-to-understand investment product offered.

The insurance company will let you know about monthly and annual payout plans, interest rates, and the investment timeline. These details will be mentioned in your contract. Compared to other annuity types, a fixed annuity does not have complex financial formulas involved.

Benefit from Tax-Deferred Investment

In a fixed annuity, all the interest you have earned falls under the tax-deferred category. As a result, the interest can continue to grow without being taxed. The taxes come into play only when you withdraw funds from the account.

The interest you earn overtime gets safely accumulated and continues to grow. Therefore, you can probably look at increased earnings due to the compounding interest rate.

Protection Guaranteed

You will not lose the initial investment made with a fixed annuity plan like a multi-year guarantee annuity. You get principal protection, meaning at the end of the policy term, you will get your initial investment back, guaranteed.

When you want your money to make you money, there are always risks involved in the process. If you want to grow your investment but want to do so with the least risk, then fixed annuities should be your investment product of choice. They come with predictable interest rates and payments and payout periods, making them ideal for retirement.