What is a Declared-Rate Annuity and How Does It Work?

Shawn Plummer, CRPC

Chartered Retirement Planning Counselor

A declared rate annuity is a type of fixed annuity where the insurance company guarantees a specific interest rate for a set period. This rate is declared at the start of the period and is typically reviewed annually.

Key Features of Declared Rate Annuities

  1. Guaranteed Interest Rate: The insurer sets an interest rate at the beginning of each term.
  2. Principal Protection: Your initial investment is protected from market fluctuations.
  3. Tax-Deferred Growth: Earnings grow tax-deferred until withdrawal.
  4. Flexible Terms: Different term lengths are available to suit your investment strategy.

Benefits of Declared Rate Annuities

  • Stability: Provides a predictable income stream with minimal risk.
  • Tax Advantages: Defers taxes on earnings until you make withdrawals.
  • Customization: Choose term lengths and other features to match your financial goals.

Drawbacks to Consider

  • Lower Returns: Typically offers lower returns compared to variable annuities or other investments.
  • Liquidity Constraints: Early withdrawals may incur penalties and surrender charges.
  • Inflation Risk: Fixed interest rates may not keep pace with inflation over time.

Who Should Consider Declared Rate Annuities?

  • Risk-Averse Investors: Ideal for those seeking a safe, guaranteed return.
  • Retirees: Provides a reliable income stream during retirement.
  • Long-Term Planners: Suitable for individuals planning for future financial needs, such as retirement.

Additional Information

Fixed Indexed Annuities

A fixed-indexed annuity is a type of fixed annuity that combines a declared rate with the potential to earn interest based on the performance of a stock market index or a combination of both. The declared rate can change annually, providing the opportunity for higher returns while still offering principal protection.

How to Choose the Right Declared Rate Annuity

  1. Compare Rates: Look for competitive interest rates from reputable insurers.
  2. Assess Financial Strength: Ensure the insurer has strong financial ratings.
  3. Understand Terms: Review the annuity contract for details on interest rates, term lengths, and fees.

What We Recommend

Declared rate annuities can be an excellent choice for conservative investors seeking stability and guaranteed returns. By understanding their features, benefits, and potential drawbacks, you can make an informed decision that aligns with your financial goals.

For a stable and predictable investment, declared rate annuities offer guaranteed returns and principal protection. Evaluate your risk tolerance, compare options, and consult with a financial advisor to determine if this is the right choice for your portfolio.

Contact us for personalized advice or a quote to find the best declared rate annuity for your financial needs.

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Shawn Plummer, CRPC

Chartered Retirement Planning Counselor

Shawn Plummer is a Chartered Retirement Planning Counselor, 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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