Analyzing The Intricacies of Fixed Annuities

Each policy has an initial rate guarantee period. The initial rate is often quite attractive but if it doesn’t have a longer lock-in period you might be stuck with a product paying low rates. Some companies have an extended initial rate guarantee but offer a first year bonus to make the product more attractive. After the initial year the rate applied to the subsequent years is often much lower.

Find out what the minimum guarantee is for the product. In times when the interest rate is smaller than one a minimum guarantee of two or three looks excellent.

Investigate the minimums if you’re looking for an initial investment. Some companies charge a service charge if you’re under a specific amount. Others simply won’t take your because it’s too small. Not all companies need you to be a Rockefeller to invest with them. Even if you have an adequate sum you may be concerned about starting a new product & simply want to test the water. Look for the policy minimums when investing smaller amounts.

Pay attention not just to the initial investment but also the amount of subsequent investments if you plan to ad a little at a time. Even if you don’t think you’ll add more funds you’ll probably be surprised when you realize that not only is an annuity tax-deferred it makes your organization easier if you want to simplify your finances & narrow it down to only a couple of investments. You also name the person that you want to receive your funds if you pass away.

It’s important to find out how long the surrender charges last on the fixed annuity of your choice. While some annuities have as short of a period as a year & then quit charging an early surrender fee others may have one that lasts a lifetime & don’t go away even if you pass but require annuitization by you or your beneficiaries to avoid it.

See how your heirs have to take the proceeds. There are a few annuities on the market which only allow heirs to annuitize or they face a stiff surrender charge. These are not the best annuities unless that fits your wishes. Some parents are delighted to know that their children won’t be able to spend the funds all at one time.

Even if you never plan to remove money from your annuity it’s comforting to know you have access before the end of the surrender period. The amount of penalty free withdrawal varies from company to company with some companies offering interest only & others allowing you to take as much as 10 percent per year cumulative if you don’t take it in one year. Most companies offer withdrawal right somewhere between the two extremes.

Shopping for an annuity is the same as any other major purchase. It requires that you shop carefully & look for features that are important for you. Even though you may talk to an insurance agent & look at the products he offers check around for other products to see if his are the best for your situation.

Christopher Tyler discusses of fixed annuities & other investment options for retirement. As the economy slides into the worst recession in decades more & more investors are looking for safe options to grow their investment for retirement. Visit our site to learn more about the fixed annuity as a viable investment for retirement.