Are Fixed Annuities Compounded?

Shawn Plummer

CEO, The Annuity Expert

Are Fixed Annuities Compounded?

Fixed annuities typically use compound interest, where the interest earned is added to the principal, and future interest is calculated on the new total.

However, some fixed annuity policies may use simple interest, where interest is calculated only on the original principal.

It’s important to understand the specific terms of your annuity contract.

Find out how much you’ll receive each month by using our annuity payment calculator

Understanding Interest in Fixed Annuities

  1. Compound Interest:
    • In most fixed annuities, interest is compounded.
    • This means interest is calculated on both the principal and previously earned interest.
    • Leads to exponential growth over time.
  2. Simple Interest:

Key Takeaways

  • Read Your Policy: Always check your specific annuity contract to understand the interest calculation method.
  • Consult a Financial Advisor: For personalized advice, consider speaking with a financial expert.

Conclusion

Understanding how interest is compounded in fixed annuities is crucial for retirement planning. Most offer compound interest, but some may use simple interest.

Review your policy details carefully. Contact us today for a free quote.

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Shawn Plummer

CEO, The Annuity Expert

Shawn Plummer is a licensed financial professional, insurance agent, and annuity broker with over 14 years of first-hand experience with annuities and insurance. Since beginning his journey in 2009, he has been pivotal in selling and educating about annuities and insurance products. Still, he has also played an instrumental role in training financial advisors for a prestigious Fortune Global 500 insurance company, Allianz. His insights and expertise have made him a sought-after voice in the industry, leading to features in renowned publications such as Time Magazine, Bloomberg, Entrepreneur, Yahoo! Finance, MSN, SmartAsset, The Simple Dollar, U.S. News and World Report, Women’s Health Magazine, and many more. Shawn’s driving ambition? To simplify retirement planning, he ensures his clients understand their choices and secure the best insurance coverage at unbeatable rates.

The Annuity Expert is an independent online insurance agency servicing consumers across the United States. The goal is to help you take the guesswork out of retirement planning and find the best insurance coverage at the cheapest rates

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