Annuity Blog

4 Common Investor Scenarios that Fixed Annuities Answer

Posted by: Anne Morrison | Jan 22, 2015

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The stability offered by a fixed annuity can be invaluable for people heading into retirement. This retirement income solution helps investors maintain their quality of life and still protect the rest of their savings. However, knowledge about its features is not widespread, and many still have misconceptions regarding its value.

Here are some of the most common scenarios faced by investors – and how fixed annuities could be the solution they’re looking for.

“I’m still young and I think annuities are only for those near retirement.”

Actually, you can buy a fixed annuity at any age and still maximize your gains from it. While there are immediate annuities aimed at those who are already in retirement, other annuity products are designed to grow over time so that your overall proceeds in retirement are comparably larger.

By choosing a deferred annuity, you can set when you wish to start receiving your annuity proceeds. Timing this to start when you retire lets you continue living the way you’re used to even though you no longer have job income. What’s more, you can ensure that you receive this retirement income for the rest of your life.

“I’m waiting for interest rates to go up.”

With fixed annuities, you won’t need to wait for better interest rates. In fact, your savings will grow more by starting early at any interest rate rather than waiting for it to go higher.

Each year you delay in getting a fixed annuity means it gets longer before you can match the growth of someone who purchased today. Moreover, money placed in a fixed annuity is tax-deferred and grows at a compounded rate, so there’s already a lot of value in investing sooner rather than later.

“I can get more money by investing somewhere else.”

While it’s true that other investment options could earn you much bigger returns, they’re also accompanied by the corresponding risk that you could lose more. For those who have low risk tolerance, a fixed annuity makes a lot of sense.

Most people are averse at the “gambling” factor that other investments have, especially when it’s their hard-earned retirement savings on the line. Fixed annuities have a guaranteed rate of return, so you can rely on consistent income in the future.

“I want to control how my beneficiaries receive my remaining proceeds.”

Multiple or complex beneficiary situations can be handled by certain annuity carriers who specialize in seeing your inheritance distributed the way you want.

Carriers can grant you a restrictive beneficiary designation endorsement, which lets you control how your death proceeds are handled later on. Whether you wish to set up lifetime income for beneficiaries who may be too young to manage money, or divide lump amounts to multiple heirs, this option allows you to do so.

Certainly, fixed annuities can make for great investments that are perfect for investors looking for reliability and consistency.