Retirement Planning

Boost Your Retirement Income with a Fixed Annuity

Many investors who do not wish to risk their principal in the stock market have been frustrated in recent years by the low returns that are being paid in guaranteed instruments such as CDs and Treasury securities. One alternative that they might consider is to invest a portion of their money in one or more fixed annuity contracts. These investments can pay slightly more than CDs and Treasury bonds, depending on the investment amount and prevailing interest rates. An investor who has a $100,000 CD maturing can move that entire amount into a nonqualified fixed annuity contract and have the entire amount start growing tax-deferred. It should be noted that fixed annuities are retirement savings vehicles, and any withdrawals that are taken from the contract by an investor who is younger than age 59 ½ will be subject to a 10% early withdrawal penalty. However, many annuities offer annual withdrawals of 10% or less of the contract value without incurring a penalty. Fixed annuities are among the safer vehicles that you can invest in. Although they are not backed by the FDIC; they are backed by the financial strength of the life insurance carrier who issues the contract. And the life insurance company is required by law to have a cash reserve on hand that backs every fixed and indexed annuity contract that it issues. Furthermore, if the insurance carrier were to become insolvent, state guaranty associations would step in and cover any eligible contracts up to a specified amount. Investors can also mitigate risk by choosing a carrier with a high insurance company rating.

Fixed Annuity Benefits

Fixed annuities also provide some other advantages for investors. All types of annuity contracts, including fixed annuities, are exempt from the probate process. This means that the beneficiary that you specify on the fixed annuity contract will receive the proceeds from the annuity without this money having to go through the probate process, which can take a lot of time and money in some cases. Many annuity contracts also provide at least a measure of protection from creditors and lawsuits. This protection varies somewhat from one state to another, so check with your state insurance commissioner to find out what level of protection they offer where you live. Additionally, interest that is paid on a fixed annuity will compound relatively faster because the contract will grow tax-deferred. Fixed annuities can therefore be a good choice for conservative retirement savers looking for a better rate of return.

For more information on fixed annuities, call Protective Life at 1-800-833-8991.

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All Learning Center articles are general summaries that can be used when considering your financial future at various life stages. The information presented is for educational purposes and is meant to supplement other information specific to your situation. It is not intended as investment advice and does not necessarily represent the opinion of Protective Life or its subsidiaries.

Learning Center articles may describe services and financial products not offered by Protective Life or its subsidiaries. Descriptions of financial products contained in Learning Center articles are not intended to represent those offered by Protective Life or its subsidiaries.

Neither Protective Life nor its representatives offer legal or tax advice. We encourage you to consult with your financial adviser and legal or tax adviser regarding your individual situations before making investment, social security, retirement planning, and tax-related decisions. For information about Protective Life and its products and services, visit www.protective.com.

Companies and organizations linked from Learning Center articles have no affiliation with Protective Life or its subsidiaries.

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