subject: Fixed Annuities [print this page] Fixed Annuities Fixed Annuities
Fixed Annuities
What are fixed annuities? There are two types of annuities, fixed annuities and variable annuities. Fixed annuities insure your principal against loss as long as you do not surrender the product within the surrender period. Variable annuities do not insure your principal against loss, and you can lose money.
Fixed annuities have three types of annuity products within this group. There are immediate annuities, CD annuities, and fixed equity index annuities.
Immediate annuities payout a small internal rate of return of 65 basis points (thats less than 1%) plus your principal (or a portion of your principal) over given term. This type of product may not give back your original investment principal. Example: Your investment is $100,000. Your monthly check is $350 a month. Your current age is 65. Your theoretical life span is 22-years. $350 x 12-months x 22-years = $92,400. So, you do not recover your original investment principal.
Another point that is not so thrilling about immediate annuities is the option called life annuitization. This option insures an income payout as long as you live, however long your lifespan actually is. And if you die next month and only receive one paycheck for $300, the principal balance becomes the property of the insurance company, not your spouseso your spouse would get nothing!
CD annuities were a great product in the bull market of the nineties, but today these products offer a bonus of 6% to 8% in the first year, and give you a low yield (of approximately 2%) every year thereafter. Because of this drop in yield, this product may go into the history books.
The final product, fixed equity index annuities, offer a guarantee against loss (if you hold the product beyond the surrender period), and offer you a participating return of market index (with cap on total returns). Its a nice way to enjoy market returns, without risk of principal (as long as you do not surrender the product in the surrender period).
If you want to solve for maximum lifetime income, yet want to recover your initial investment principal, so you never run out of money in retirement; I would recommend you go to my website and get a free report and solution. It would be your best bet for retirement.
