What Is a Fixed Annuity?

Many investors may be wondering "What is a fixed annuity?" A fixed annuity is a type of investment that many individuals choose when planning for retirement. Here are the basics of fixed annuities and whether they would be appropriate for you.

Fixed Annuity

A fixed annuity is a product that is sold by insurance companies. You can purchase it through periodic premium payments or you can purchase it with a lump sum. Once you purchase this type of product, the insurance company guarantees to provide you with a regular monthly payment during your retirement years.

Tax Benefit

When you put money into an annuity, it will steadily grow in value from investments. With annuities, you do not have to pay any money on the earnings from the investments until you start receiving checks when you retire.

Passive Investment

Annuities are considered to be a passive form of investment. You do not have to make individual investment decisions once you get involved with an annuity contract. You simply pay your premiums and then the insurance company takes care of the rest. You will not have to worry about anything other than making your payments and then you will have a steady retirement check waiting for you when you are ready. 

Annuity Table

An annuity table is a device that is commonly used by individuals who own annuities in order to determine a present value for the investment. An annuity is a type of investment that is provided by an insurance company and makes regular payments to the annuity holder over a certain amount of time. Since the investment makes regular payments to the investor, it can be difficult to gauge how much the total annuity is worth in today's dollars. By using a discount rate and the amount of the payments, an individual can utilize an annuity table to determine the value of his or her annuity.