A fixed annuity is a type of financial contract that offers guaranteed rates of return, often with the promise of lifetime payments. However, when you invest in a fixed annuity, it can be challenging to take your money out before the agreed-upon time period is up. This post will show you what “fixed” means in terms of fixed annuities and how these products are different from other types of investment vehicles.
The Term “Fixed” Refers To
The term “fixed” in a fixed annuity refers to the insurer guaranteeing the contract owner that:
- Your principal will not be lost regardless of the insurer’s investment performance.
- The interest equal to a minimum rate specified in the contract will be credited and guaranteed.
Interest Rate Guarantees
There may be two levels of guaranteed interest in a fixed annuity:
- A current rate that is guaranteed at the beginning of each calendar year
- Fixed Annuity: The interest rate is predetermined for all years at the sale of the contract.
- Fixed Index Annuity: The interest rate is guaranteed at the beginning of each calendar year and can change yearly.
- A minimum guaranteed rate will be paid if the current rate falls below this.
Related Reading: What Are The Best Fixed Annuity Rates Today?
Interest Credited To a Fixed Annuity Is No Lower Than The
The interest payable for any given year is declared in advance by the insurance company and is guaranteed to be no less than the minimum specified in the contract. A fixed annuity has two interest rates: a minimum guaranteed rate and a current rate.