Fixed annuities are essentially CD-like investments issued by insurance companies. Like CDs, they pay guaranteed rates of interest, in many cases higher than bank CDs.
Fixed annuities can be deferred or immediate. The deferred variety accumulate regular rates of interest and the immediate kind make fixed payments – determined by your age and size of your annuity – during retirement.
The convenience and predictability of a set payout makes a fixed annuity a popular option for retirees who want a known income stream to supplement their other retirement income.
Fixed annuities pay guaranteed rates of interest, which makes them appealing to investors wary of the stock market’s ups and downs. What also makes them appealing are their low investment minimums – usually $1,000 to $10,000 – and the fact that the interest they pay escapes taxation until you pull it out.