Fixed
annuities
are contracts with a predetermined rate
of return. At least a minimum rate is guaranteed during the build-up
period of a deferred annuity, although it could be more. During
the payout period of a fixed immediate annuity or a deferred fixed
annuity, every payment you receive will be the same.
Fixed annuities may be appealing if you like the
financial and psychological security of regular earnings and a
dependable monthly income for the rest of your life. Since the
insurance company offering the contract is responsible for investing
your fixed annuity premiums, these products may also be attractive
if you’re hesitant to make your own investment decisions.
One limitation of fixed annuities is that over
time, their
rate
of return
may not keep pace with
inflation.
That means that your monthly check will have less purchasing power
as you get older, and might not cover the expenses that it covered
when you first began to get income.
