What is a Fixed Period Annuity and How Does It Work?

Shawn Plummer

CEO, The Annuity Expert

If you are looking for a stable and reliable way to save for retirement, you may want to consider investing in a fixed period annuity. This type of investment can provide you with a steady stream of income during your golden years. In this guide, we will discuss what a fixed period annuity is and how it works. We will also explore the benefits of this investment vehicle and answer some common questions people have about it.

What Is A Fixed Period Annuity?

This is an option where you get payments for a certain amount of time. After that, you stop getting payments, even if you’re still alive. This is in contrast to an annuity where payments continue for as long as you’re alive. The time period can be anywhere from five to 20 years, or even longer.

How Does It Work?

With a fixed-period annuity, you make regular payments into the account. These payments can be made weekly, monthly, or yearly. The money in the account then earns interest. When the fixed period ends, you can start withdrawing money from the account.

The amount of money you get each month will depend on how much you have saved up and the interest rate that is being earned. If you need to, you can also take out a lump sum of cash when the period ends.

Fixed Period Annuity

What Are The Benefits?

There are several benefits that come with investing in a fixed-period annuity.

  • First, it can provide you with a steady income during retirement. This can be helpful if you want to maintain your current lifestyle or plan for certain expenses.
  • Additionally, the payments from a fixed period annuity are often tax-deferred. This means that you won’t have to pay taxes on the money until you start withdrawing it.
  • Another benefit of this type of annuity is that it can serve as a death benefit for your beneficiaries. If you pass away before the fixed period ends, your beneficiaries will receive the money that is in the account.

This can help to provide financial security for your loved ones.

Fixed Term Annuity

Are There Any Risks?

There are always risks associated with any type of investment. However, the risks with a fixed period annuity are generally lower than other types of investments. This is because you are not investing in the stock market or other volatile areas.

  • You will earn little to no interest. Fixed period annuities basically pay your investment back to you with around 1% in interest annually.
  • Another risk is giving up control over your asset. Fixed period annuities use annuitization as the method to distribute your payments which is irrevocable.
  • One of the biggest risks is that you may outlive the fixed period. This means that you would no longer receive payments from the annuity. However, you can purchase a deferred annuity instead and collect penalty-free withdrawals which in turn will provide you more interest, your beneficiaries a lump sum death benefit (instead of a series of payments), and more control over your money.
  • Another risk to consider is inflation. If inflation goes up, the value of your payments may decrease.
Fixed Period Option

How Do I Choose The Right One?

There are a few things to keep in mind when choosing a fixed-period annuity. First, you’ll want to consider how long you want the payments to last. As we mentioned earlier, the fixed period can range from five to 20 years or longer.

You’ll also want to think about how much money you want to receive each month. This will depend on your current lifestyle and expenses. Additionally, you’ll need to compare different annuity providers to find the best interest rates and terms.

Bottom Line

When it comes time to choose a fixed period annuity, there are a few things to keep in mind. However, this type of investment can provide you with a steady stream of income and many other benefits. With a little research, you can find the perfect annuity for your needs.

What questions do you have about fixed period annuities? Contact below!

If you’re looking for more information on retirement planning, check out our other guides. We cover a variety of topics, including Social Security, IRAs, and more.

What Is A Fixed Period Annuity

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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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