A fixed annuity may or may not be right for you, but below is a checklist to help you start thinking about them.
This is not a comprehensive list, just a starting point.
Fixed annuities might make sense if:
The funds you have available for the fixed annuity are for retirement savings or your heirs.
You want to put this money somewhere for five years or more.
You’ve maxed out the contributions to your IRA and 401(k).
You already have a portion of your money allocated to assets with higher expected returns.
You don’t need access to all of these funds for financial emergencies.
Fixed annuities might NOT make sense if:
You need the ability to withdraw, without penalty, a significant portion or all the funds before 59½ years of age.
You need the ability to withdraw, without penalty, all the funds before the end of the fixed annuity’s surrender charge period.
You can still add more IRA and 401(k) contributions.
You seek higher returns, particularly from investments/products where your principal is at risk and not protected or guaranteed.
In summary
Annuities are long-term products designed for retirement income. They involve fees and charges including potential surrender penalties. Withdrawals are subject to ordinary income taxes and a 10% federal penalty if taken before age 59½.
Annuity guarantees are backed by the financial strength and claims-paying ability of the issuing company. Product and feature availability may vary by state.