How Do Fixed Annuities Work?

In this video, Ryan discusses the Fixed annuities also known as cd annuities which provide a tax-deferred fixed rate of return with no fees and no risk.

Fixed annuities are usually offered in 3 year or 5 year terms. Unlike bank cds, during the term of a fixed annuity access to funds is available without penalty or fees and many use the interest paid from fixed annuities as income. Contrary to many beliefs fixed annuities pay the full account value plus any interest without penalty to heirs in the event of death.

Fixed annuities are financial products that offer a guaranteed rate of return over a set period of time in exchange for a lump sum payment. They are often used as a retirement savings tool, providing a predictable stream of income to the investor.

The insurance company issuing the annuity guarantees the rate of return and is responsible for investing the funds to ensure the payment of future income. The return on a fixed annuity is not tied to the performance of the stock market, making them a low-risk investment option.

Ryan is talking about fixed annuities and comparing them to bank CDs. He states that the difference between the two is that fixed annuities are offered by insurance companies while bank CDs are offered by banks.

He explains that with a fixed annuity, a person puts a certain amount of money into the program and is guaranteed a fixed rate of return for a certain period of time. Ryan mentions that there are surrender charges if the person withdraws the money early, but no ongoing fees. He notes that a fixed annuity allows for more liquidity compared to bank CDs and also grows tax-deferred. He also mentions that the beneficiary of a fixed annuity is designated and automatically avoids probate.

Finally, fixed annuities can be great products for the right person, someone looking to save money without taking on market risk, who wants to use the interest for living expenses without penalty.


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