subject: The Benefits Of A Fixed Annuity [print this page] As a safe and reliable investment tool, fixed annuities provide a steady return. The returns are low as compared to other annuity options, yet a majority of the investors choose to go for a fixed rate annuity. There are various benefits of a fixed annuity that make it an ideal investment alternative.
Stability of Rate
The annuity has a fixed rate that does not digress. Unlike other types of annuities, where market forces play a major role, a fixed rate annuity maintains the annual rate of return. Because of this, you can calculate the returns on your investment year after year. You can continue to improve your net worth unless you withdraw your investment.
Certainty
The uncertainty inherent in almost all investment vehicles is a reason why people are apprehensive about saving. However, fixed annuities offer a great deal of certainty in terms of returns and earnings. The rate is given to you beforehand and then you can decide whether or not you want to invest your money. It eliminates the speculative nature of other annuity types.
Tax Deferral
There are several fixed annuities that offer you the chance to defer your taxes. This means you don't have to pay tax on the interest you are earning each year. It leads to a substantial return on investment, as compared to if you were paying tax year after year. Your savings multiply at a quicker pace as a result. You can continue to defer the taxes till you fall into a lower tax bracket post retirement. This is one of the major benefits of a fixed annuity.
Low Risk Investment
In the volatile economic environment, a fixed annuity scheme is one of the safest investment tools. The low risk investment is protected from market forces. There are no fluctuations and rapid changes as is the case with buying shares and bonds. Consequently, you can complete the investment term without making a withdrawal and receive a substantial sum of money. The interest rate remains the same so there is little to no risk.
Post-Death Benefits
Thinking about the post-death benefits of fixed annuities isn't a particularly pleasing thought. Yet, there are certain advantages your family can avail after your demise. A fixed annuity is not added to your estate which means that your creditors cannot assert their right on it. The money will be transferred directly to the beneficiaries you cite when making the agreement.
Retirement Fund
Your fixed annuity can become a bona fide retirement fund. If you are near the age of retirement, you can annuitize your investment and you will continue receiving interest. This option is available with almost all the types of annuities but few people make use of it with regards to fixed annuities. This is purely because of a lack of awareness rather than for any other reason.
These are some of the benefits of a fixed annuity. As you can see, it is a secure and steady investment option that may not offer exceptionally high returns but is less risky.
