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Fixed and Fixed Indexed Annuities

An Annuity Contract is designed for individuals who can accept a modist return without market risk. There are several types of annuities to choose from depending on your needs and goals.

Annuity account types include fixed, indexed, immediate, structured and variable. Annuities will have terms ranging from 1 year up to a lifetime.

Annuities are popular for a variety of reasons. Other than variable accounts, all other annuities offer safe and predictable rates of return as well as protection of the invested principal. Unlike other financial products, you can defer income taxes on your gains in a fixed or indexed annuity. You can also withdraw interest on a monthly basis or through a stream of income for your lifetime.

Annuities are Safe And Tax Deferred  products

Fixed annuities are widely recognized as some of the safest financial products available. They are backed by very strict reserve requirements for all insurance companies as well as the state of residence.

It is important to choose a well capitalized and highly rated provider. There are several independent agencies that rate the overall strength of annuity providers including: AM Best, Moody's, Standard and Poor, and a few others.

Annuities have significant tax advantages over other comparable Financial products.  Bank certificates of deposit and many other income generating accounts are taxable whether or not the interest is withdrawn. If you do not withdraw the interest from your annuity, no income taxes are owed.

Taxes can be deferred for your lifetime in a non-qualified annuity if desired.* The interest compounds and your investment will grow larger more quickly.

Albert Einstein proclaimed compounding interest as one of the great inventions of the modern world. He understood that this simple, powerful concept in action was an important key to wealth accumulation.

*A qualified annuity requires a mandatory distribution at age 70 and 1/2. (You should always consult your accountant for tax advice.)

Annuities Offer Needed Investment Flexibility

Annuity accounts are extremely flexible. Their maturity terms can range from as little as 1 year on up to a lifetime. Generally, an account with a longer maturity will offer a higher interest guarantee and/or premium bonus. Many insurance companies offer 1st year premium bonuses between 5-10% for terms longer than 5 years.

Most annuities allow you to add money throughout the duration of the contract without re-starting the maturity date or surrender period. And many contracts allow for systematic interest withdraws on a monthly, quarterly, bi-annual or annual basis without penalty. Unlike C.D.'s, these accounts also offer you access to a portion of your principal during the maturity period, usually 10-20% of the account value if needed.

Systematic Annuity Income and Tax-Free Transfers

At or before maturity, you also have the option of withdrawing your money systematically �" like you would from an employer pension plan or Social Security. This is referred to as an annuitization �" see the immediate annuity explanation for more details.

However, most consumers withdraw their annuities in a lump sum just as they would when cashing in a certificate of deposit. Still others exchange older accounts for new ones in what is called a "1035 tax free exchange.” This type of transfer allows any tax deferred interest in the older contract to be deposited tax free into a new policy.

Common And Incorrect Annuity Myths

There are two common myths concerning annuity investments. The first is that you have little access to your investment during the surrender term. The second is that the insurance company keeps all of your money at passing. These myths are simply not true. The facts are these: unless you choose to annuitize your contract, you have access to your funds just like you would a certificate of deposit and your beneficiaries will receive the full account value at passing.

Tax deferred annuity investments are all around you. Many state retirement plans like Public Employee Retirement System and State Teachers Retirement System use these accounts for their employees. In fact, every year billions of dollars from individuals and employers alike flow into safe investment vehicles for many of the above mentioned reasons.

Annuities And You

The bottom line is that an Annuity Contract are appropriate for many conservative investors. Annuities can safely provide reliable returns, monthly interest, a lifetime stream of income, tax deferral, probate avoidance, safety of principal, and most importantly peace of mind.