Fixed annuities are the most popular type of annuities with retirees because they are similar to CD-like investments, and like CDs, pay guaranteed rates of interest. In most cases, however, annuities pay higher rates of return than CDs. With these annuities, a pre-retiree invests a certain dollar amount into the annuity and the issuing company provides them with a guaranteed, tax-deferred interest rate.
Tax deferral is a huge advantage annuities provide versus CDs, because the tax deferral allows investors to gain interest off all of the money in their account, rather than the lesser amount they would have after paying yearly taxes. Fixed annuities also provide retirees with payment flexibility, giving them the option to choose when they receive payments off the annuity and for how long. Payout options range from a predetermined number of years to the rest of your life. If you don’t like risk but want a better return on money than CDs, fixed annuities may be the option for you.
Fixed indexed annuities offer many of the same benefits of traditional fixed annuities, such as the reliability and potential for better long-term growth. Fixed indexed annuities also offer an income rider called the death benefit. A death benefit can provide the retiree with confidence they have some form of income they won’t outlive, no matter how old they live to be.
The benefits are particularly popular because they allow retirees to make withdrawals every month while also gaining interest on their money. Additionally, they are a great way to augment Social Security while also leaving a legacy for your loved ones or a charity of your choice.
