Annuity Fast Facts: Fixed Annuities

Annuity Fast Facts

A series to create increased awareness of annuities by providing market color, friendly tips, and interesting stats at-a-glance.

A deferred annuity is a long-term tax deferred investment issued by an insurance company and purchased through a qualified professional.

There are four main types:

FIXED ANNUITIES

Fixed annuities preserve retirement assets by providing both a guaranteed annual return and full protection of principal.

Did you know?

Banks are not the only option when seeking a return on money that an investor does not want to risk losing. Insurance companies have had a version of a Certificate of Deposit (CD) for decades. Like CDs, fixed annuities provide both:

• full protection of an investor’s premium
• a specified, guaranteed return

Tax fact: keep more to earn more

With a fixed annuity, interest in an investor’s contract grows tax deferred and annual tax savings stay in the account to earn interest. This can grow savings faster, until money is withdrawn. Contrast that to a CD, where earned interest is taxable every year.

Friendly tip: shop around

Just like some banks will pay more on savings than other banks, fixed annuity rates can differ widely from one insurance company to another. In addition, like CDs, fixed annuities come in a wide range of rate guarantee periods.

Interesting fact

Fixed annuity sales in Q2 2022 were up 76% versus Q2 2021. Fixed annuities benefit from rising interest rates, with insurance companies able to offer more attractive rates.¹

• Because fixed annuities generally have longer holding periods than CDs, insurance companies generally offer higher annual interest rates than a typical bank CD.

• Investors should work with a qualified professional to find the right fixed annuity for their financial needs.

• Given the equity market’s pullback in 2022, many investors are looking for a reasonable return on retirement savings they are not willing to put at risk.

Know that fixed annuities:

• May not provide returns that keep pace with inflation
• Are not FDIC insured like CDs, and guarantees under a fixed annuity contract are backed by the issuing insurance company and subject to its claims paying ability
• Are considered a long-term investment, typically carrying penalties (such as a surrender charge) if money is withdrawn during the stated surrender period
• Come with an additional 10% federal tax penalty for withdrawals prior to age 59½

READ ON

Our previous article on fixed annuities explains how they work and the role they play in an investment portfolio. Find it, along with our complete library of articles and videos on simon.io/engage

¹ Secure Retirement Institute: Second Quarter Annuity Sales Shatter Record Set During the Great Recession, LIMRA, July 2022

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©2022 SIMON Markets LLC. All Rights Reserved. | Originally published 2021.08 | Updated 2022.08

This is not intended to be an offer or solicitation to purchase or sell any security or to employ a specific investment strategy. This material is intended as general background information, for educational purposes only, and should not be used as a primary basis to make a decision to purchase an annuity contract. This material is being provided for informational purposes only and does not take into account any specific investment objectives or financial situation of 
any investor. The information is not intended as investment advice and is not a recommendation about managing or investing retirement savings. Actual annuity contracts may differ materially from the general overview provided.

Prior to making any decision with respect to an annuity contract, purchasers must review, as applicable, the offering document, the disclosure document, and the buyer’s guide which contain detailed and additional information about the annuity. Any annuity contract is subject in its entirety is to the terms and conditions imposed by the carrier under the contract. Withdrawals or surrenders may be subject to surrender charges, and/or market value adjustments, which can reduce the owner’s contract value or the actual withdrawal amount received. Withdrawals and distributions of taxable amounts are subject to ordinary income tax and, if made prior to age 59½, may be subject to an additional 10% federal income tax penalty. Annuities are not FDIC-insured. All references to guarantees arising under an annuity contract are subject to the financial strength and claims-paying ability of the carrier. This does not constitute legal, accounting or tax advice, and the recipient should consult with his or her legal, accounting or tax adviser regarding the instruments described in this material.

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