Fixed Deferred Annuities are a type of annuity contract primarily used for retirement savings where the earnings accrue on a tax-deferred basis until the money is withdrawn. This specific type of deferred annuity ensures that the account value increases based on fixed interest crediting rates, which are often derived from the performance of an annuity provider’s general investments, e.g., corporate bonds and real estate. These rates can be seen as relatively stable compared to variable or indexed annuities that are subject to market uncertainty.
Key Features
- Steady Growth: Investors in fixed deferred annuities are guaranteed a minimum return every year, which protects the principal against downturns in the broader economy or the financial markets.
- Tax Deferral: The accumulation of income within the annuity occurs on a tax-deferred basis, meaning taxes on interest gains are not paid until withdrawals begin.
- Guaranteed Income: On accumulating a significant sum or reaching a predetermined age, annuitants usually translate their accumulation to a guaranteed, steady stream of income for retirement—effectively annuitizing the sum.
For additional and reliable details regarding annuities regulatory requirements, you can refer to the Department of Treasury’s Resource Center. Additionally, information on the financial guarantors and the respective regulations can be obtained by consulting the Insurance Information Institute.
Useful for:
- Those nearing retirement age who prioritize stability in pensions.
- Investors concerned with the protection of principal over high-risk growth.
- Financial planners recommending diversified retirement portfolios.
