Disclosures
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The following are some facts about fixed annuities:
- A fixed annuity provides a predictable guaranteed income stream for life. This works well for those who want lifetime income protection and who live to or beyond their life expectancy, but those who do not may receive less money from the annuity than they put in.
- Inflation can erode the value of a fixed-income annuity payment over time. In addition, consumers who cancel early are typically charged. There are no federal guarantees if the insurance company offering the fixed annuity fails, though state guarantee funds could protect some, or all, of the promised payments. Tax-deferred fixed annuities, at time of withdrawal, are taxed as ordinary income and not as capital gains. (Ordinary income is usually taxed at a higher rate than capital gains.)
See Also
The Pros and Cons of Annuities