Fixed annuities are single premium investment products that provide the ability to earn guaranteed interest over a fixed term. They are a great way to protect and grow accumulated savings without downside risk.
An individual has the choice to select the duration of their desired investment, which corresponds to a fixed rate of return. Generally the longer an individual invests, the higher the rate of return. Interest is credited every day and compounded annually.
At the end of the fixed term, a guaranteed amount is earned. This amount does not depend on market performance – it is based on the guaranteed interest rate stated in the contract.
Fixed annuities are for investors that seek both reasonable investment returns and safety of principal over a medium to long term basis. It is also for individuals that want the option, but not the requirement, to convert their savings into a monthly guaranteed payment over a stated period or their lifetime.
Given the increasing reality of outliving financial resources during retirement, most individuals should consider allocating at least some of their savings to a fixed return product like an annuity. Typically the percent allocation to a fixed product should increase as a person gets older.