Benefits of Fixed Annuities?

Many people opt to go with fixed annuities over variable annuities because of their stable fixed rate. In fact, fixed annuities make up over 75% of total annuity sales. Who wouldn't want a guaranteed 4 to 8% these days, especially with the up and down stock market?

Fixed annuities allow you to know exactly how much you'll have at the end of the term. For example, if a person vests $50,000 through a 10 year guaranteed fixed annuity and does not withdrawl money early, then that person can count on having $81,445 at the end of his term ($50,000 * 1.05 ^ 10).

100% Guarantee

Fixed annuities are one of the few investment vehicles that can guarantee your principle invested. Only CDs and money market accounts offer this same guarantee. The advantage that fixed annuities have is that their rates are usually much higher as well as being able to defer taxes. The worst case is that you don't earn any money at the end of the contract and get all of your original principle back.

Bailout Provision

Another interesting clause in fixed annuities is that if the insurance company decides to drop your guaranteed interest rate by more than one percent, you can withdrawl your money penalty-free and do as you wish with that money. Some seniors who get annuities also take out a reverse mortgage on their home.