Fixed Annuities Explained

What Is a Fixed Annuity?

A fixed annuity is a contract with an insurance company that pays a guaranteed interest rate for a set period. Your principal is protected from market losses, and your growth is locked in by the carrier — similar in spirit to a bank CD, but typically with higher rates and tax-deferred growth.

How They Work

You deposit a lump sum (or a series of payments). The insurance carrier credits interest at a fixed rate for the contract term — often 3, 5, 7, or 10 years. At the end of the term you can renew, withdraw, annuitize for income, or roll into another product via a 1035 exchange.

Why People Choose Fixed Annuities

Many retirees use fixed annuities for the portion of their savings they cannot afford to lose. The certainty of a guaranteed rate, no market volatility, and tax deferral make them a popular cornerstone of conservative retirement plans.

Things to Consider

Withdrawals above a free amount (often 10% per year) during the surrender period may incur charges. Withdrawals before age 59½ may face an IRS penalty. Rates vary by carrier and term — comparing options matters.

Is a Fixed Annuity Right for You?

Fixed annuities tend to fit savers who want CD-like predictability with potentially better rates and tax deferral, and who don't need full liquidity during the contract term.