Fixed Annuities

Retired Couple Dancing

Fixed Accounts

In a fixed account, principal and interest are guaranteed by the insurance company. Interest rates are usually guaranteed for one year but can be longer.

  • Declares a current rate of interest for a specified time period. Once the time expires the company will set a new rate which may be higher or lower than the original rate.
  • Guarantees a minimum interest rate of return which is specified in the contract, and at no time may the current or renewal interest rate fall below it. Guarantees the principal.


An Immediate Fixed Annuity is a contract between you and an insurance company. The buyer gives the insurance company a lump sum premium and the insurance company promises to immediately begin providing a guaranteed stream of income for the rest of your life or a set period of time.

Immediate Fixed Annuities bought with after tax dollars can offer significant tax advantages, especially to high income retirees. This is due to the fact that a significant part of the monthly income is considered a return of principal and is not taxed.

Immediate Fixed Annuities bought within a qualified account like a traditional IRA will not have any tax benefits.  However, the buyer can receive an income they will never out live.

Retirees who use Immediate Fixed Annuities as part of a long term retirement income strategy could have a much smaller chance of falling into poverty and might actually be able to spend more each year. Purchasing annuities that, when added to pensions and Social Security, will help to cover the retiree’s normal living expenses.

Knowing you can count on a guaranteed income stream can be a benefit for retirees who don’t want to worry if they will have enough money to pay the bills each month.

Since income from an Immediate Fixed Annuity will be higher the older the buyer is when it is purchased, putting off the purchase until 70 or later can make sense.