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Understanding Fixed Annuities

Fixed annuities are known to stabilize income from the investments you make and are generally used by people who are nearing their retirement life or have retired. It is, therefore, important that you invest in the best fixed annuities as you will then receive a set amount of income until a regular interval until the period has ended.

There are numerous advantages and disadvantages of purchasing a fixed annuity. Below are listed the types of fixed annuities along with their advantages and disadvantages. You can, therefore, choose one of the best fixed annuities that match your aspiration if you are living in the United States.

Assured Edge Income Builder

This is one of the best fixed annuity plans as it gives the flexibility to choose the time span when you wish to start receiving guaranteed lifetime income. This can begin even when you turn 50 and can continue for as long as you live.

American Pathway Solutions Annuity

This can also be considered as one the best fixed annuity plans as it helps reduce the uncertainty and has the ability to earn guaranteed initial interest rate for the term it has been selected. The annuity plan comes with an income option which lets the contract balance get converted into guaranteed income for the lifetime.

American Pathway Fixed 5 and Fixed 7 Annuities

This is another of the fixed annuity plans which, regardless of the economic condition of the person, guarantees the annuity to be renewed at the minimum interest rate. The initial interest rate in this fixed annuities plan can be guaranteed on a single premium for one, three, or five years.

If you are thinking about investing in one of the best fixed annuity plans in the country, you can check out numerous online resources.

Benefits of fixed annuities

Fixed annuities are known to offer safe but low returns. However, still many people prefer these due to multiple reasons, some of which have been listed below.

Safety

If you decide to buy a fixed annuities plan and hold it for the entire term, it can be considered as a safe way to grow your money. It is considered safe than investing in a bond or shares in any of bond fund as the price of the bond can fall due to an increase in interest rate.

Tax deferral

Annuities also grow into tax-deferred plans. On these plans, which are sometimes regarded as best fixed annuities, interest can be earned every year but no kind of taxes is applicable to these plans. The advantages are imminent and the savings grow at a faster pace in comparison to the scenario where the gains would have been taxed every year.

Stable returns

When a person purchases a fixed annuity plan, the annual interest rate is already known to the person and the exact worth of the investment which they might get at end of the plan. If no regular withdrawals are made, the results are always predictable.

Higher returns when the bond yield curve gets steep

Benefits trigger when fixed annuities end. You are likely to get a steep bond-yield curve in situations when bonds of longer maturity take shape firmly. This will always be more in comparison to a situation when bonds of shorter maturities take shape. Fixed annuities often end up paying higher returns and the person making the investment often benefits from the plan.

Have the option to annuitize

Similar to other annuity contracts, fixed annuities can always be converted to a retirement income plan. This is the defining feature of annuities, and only a few people know about the same.

Risks associated with fixed annuities

It is also important to understand the risks associated with fixed annuity plans.

Spending power risk

Any of the social security retirement benefits come with the adjustments to the cost of living. However, fixed annuities do not have so. Thus, the spending power risk does come along with annuity plans as inflation increases. Annuity plans do come with inflation protection but such plans cost more and, therefore, people purchase cheaper annuity plans often leaving themselves exposed to the increasing incidence of inflation.

Death and survivorship risk

In any of the fixed annuity plans, once the annuity turns over a lump-sum premium to the company providing the insurance, the same will not be returned. The person who has taken this annuity could die and the insurance company is not legally bound to return the balance amount back to the family of the deceased. The solution, in such cases, could be opting for a joint life annuity plan which is often considered among best fixed annuities plan but only a few people pay attention to this fact.

Ensure to consider these points before making any investment in fixed annuities and you could benefit well from these throughout your life.

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