Individuals can buy a fixed annuity with either a lump sum of money or a series of payments over time. The insurance company, in turn, guarantees that the account will earn a certain rate of interest. This is known as the accumulation phase.
If the annuity owner, or annuitant, elects to begin receiving regular income from the annuity, the insurance company calculates those payments based on the amount of money in the account, the owner's age, how long the payments are to continue, and other factors. This begins the payout phase. The payout phase may continue for a specified number of years or for the rest of the owner's life.
During the accumulation phase, the account grows tax-deferred. When the owner begins receiving income, that money is taxed at their ordinary income tax rate. Annuity owners may also be allowed to make a limited number of withdrawals from the account before a payout phase begins.
Fixed annuities offer a fixed rate over time which allows you to better see your return.
Only taxed when money is withdrawn.
*Timothy Holloway offers securities and investment advisory services through Royal Alliance Associates, Inc (RAA), member FINRA SIPC. RAA is separately owned and other entities and.or marketing names, products, or services referenced here are independent at RAA. Fixed Annuities are products of the insurance industry and are designed for long-term retirement needs. Annuity guarantees are subject to the claims-paying ability of the insurance company. All withdrawals of tax-deferred earnings are subject to current income tax, and, if made prior to age 59½, may also be subject to a 10% federal income tax penalty. Annuities generally contain fees and charges which include sales and surrender charges. Also, if purchased within a qualified plan, an annuity will provide no further tax deferral features.
The rates posted are subject to change.