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Fixed Annuity Overview


Fixed annuities are investment vehicles that are structured much like a bank CD. As with a CD, fixed annuities offer an interest rate over time, but also include tax benefits geared specifically towards retirement savings. Once the initial deposit is made, an interest rate is guaranteed for a specific length of time (typically 1-10 years).

Other benefits of fixed annuities are safety of principal, more liquidity than CDs and typically offer higher rate of return than bonds, CDs, or treasuries.

Annuity Overview

Types of fixed annuities

Immediate vs Deferred

Fixed annuities are typically split into two categories: immediate and deferred. With deferred annuities, pay outs will not begin until the end of the contract term (1-10 years), compounding interest much like any typical savings investment. Immediate fixed annuities start issuing monthly payments right away, and can be structured to pay out over a set amount of time or the investor’s life expectancy.

Fixed Annuities


What type of rate of return can you expect?

Fixed annuities give a solid, guaranteed growth, as long as they are not prematurely terminated. Premature termination leaves you worse off, as compared to when it is allowed to reach maturity. Deferred fixed annuities earn substantially more than other money market instruments, like mutual funds and CDs, because of a compounded and totaled tax deferral.

Typical Fixed Annuity Features:

All annuities have three primary advantages: Tax Deferral, Avoidance of Probate, and a Guaranteed Income (optional) for a fixed period of time, or income for life. More specific reasons to invest in fixed and immediate annuities:

  • 1-10 Year Term - Fixed annuities are available for short, medium, or long terms. Longer terms yield higher rates.

  • Single Premium - Fixed annuities involve a single premium, i.e. they require only one payment.

  • Guaranteed Rate — The reason why fixed annuities are so popular, is because they carry a fixed interest rate for the number of years the contract states. This translates into a guaranteed receipt for people who need regular income.

  • Very Low Risk — Money can only be lost if the insurance company becomes insolvent and your investment exceeds Annuity State Guaranty Limits.

  • Retirement Income — Fixed annuities yield a monthly fixed income, which is invaluable for retirees. Secure monthly checks can keep your household expenses sorted, even after you retire.

  • 3%-10% Return — Solid returns for essentially no-risk investment. Better than CDs, especially at longer terms.

  • Lifetime Income — An optional lifetime provision guarantees paychecks for life. No worries about outliving your retirement savings.

  • Life Insurance — Fixed annuities are like life insurance policies, for they come with the provision of death benefit for the remaining family members.

  • Unlimited Contributions — There is no limit on the amount you wish to invest in a fixed annuity, nor is there a restriction on how many policies you should or can own. Choose your amounts and leave behind a healthy inheritance for your family.

  • Inheritance — Bequeath money to loved ones probate-free. Avoid estate/death taxes.

  • Inflation Hedge — Fixed annuities are good inflation hedges as the amount you receive has some amount of interest included in it.

Continue to fixed annuity features

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