Here is a summary of some of the key features of fixed annuities:
Who sells them?
Fixed annuities are sold by insurance companies.
What’s the typical term or period when my money is “locked up”?
Fixed annuities have surrender penalty periods that generally range between 1 to 10 years, although you can usually access a portion of your money each year without a surrender penalty.
What’s the size of investment?
Fixed annuity purchased can range from $2,500 to $3,000,000.
How is interest taxed?
Interest credited and accumulated each year for a fixed annuity is NOT taxed until you withdraw the money.
What kind of liquidity is available?
Fixed annuities typically allow for a portion of your account balance to be withdrawn without penalty each year at your discretion. Withdrawals are taxes as ordinary income, and may incur a 10% federal penalty if you’re under age 59½.
Who or what is protecting the investment?
Fixed annuities are guaranteed and backed by the insurance company that issued the annuity.
How are they passed to heirs? What are the implications for estate planning?
Fixed annuities go directly to your named beneficiary without the need for the fixed annuities to go through the probate process in court.
At the end of the annuity surrender penalty period, can the account balance be turned into an income stream?
Fixed annuities at the end of their surrender penalty period can give you the option to annuitize, which means you get a guaranteed retirement income stream for a certain number of years thereafter or for the rest of your life. This income stream is irrevocable, and you no longer have access to the annuity lump sum value.
Note: This summary is a generalization. This summary does not cover all products or companies that offer them. Please review each product's specific terms and features, as they may differ from the details in this summary. Updated as of January 15, 2023.