Fixed annuities are a safe investment option that delivers predictability in an unpredictable financial world. This is a great option for anyone looking for a guaranteed stream of retirement income without a lot of risk of losing money.
Most people are familiar with the variable annuity, which fluctuates a lot and is not as safe of an investment option. With fixed annuities this is different because you receive the same payments on a regular schedule, usually annual or quarterly.
People who go with this fixed option get a lot of security in exchange for some potential losses. These are investors who want a secure stream of income more than they want to take the risk associated with bringing in higher amounts of income.
The only thing that attracts people to the variable annuity is the potential of bringing in payments substantially higher than with the fixed investment. The variable account takes on more risk and can lose more money, but for those who have other types of income to depend on the higher return rate may be enticing. The equity indexed annuities are fixed annuities that offer the potential for market like returns, without principle loss. Equity indexed annuities are not created equal, so proceed with caution when investing these contracts.
The fixed annuity is popular with people who just want a secure, stable line of income that they can depend on. These are not people who are interested in taking much risk with their money.
Fixed annuities are suitable to investors who do not have backup sources of retirement income to depend on. They are also people who are closer to retirement and simply do not have time to play around with their returns. This remains a stable, secure form of retirement investment for those who do not want to take on the extra risk that comes with the more volatile variable annuity. There may be higher amounts of returns to come with other options, but those other options are also not as safe as the fixed investment.
When evaluating fixed annuities you'll want to keep a close eye on liquidity. Make sure when your term is over you are fully liquid. The same applies to equity indexed annuities, as some require annuitization to get your money, which typically isn't a good thing.
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