Fixed Annuities

In an fixed annuity, the insurance company agrees to pay you no less than a specified rate of interest during the time that your account is growing. The insurance company also agrees that the periodic payments will be a specified percentage per dollar in your account. These periodic payments may last for a definite period, such as 20 years, or an indefinite period, such as your lifetime or the lifetime of you and your spouse.


Similar to a CD in that there is a defined term and interest rate. However, the fixed annuity has historically paid higher rates than the CD.

Pros of Fixed Annuities

  • Nobody has ever lost their principal in a fixed annuity*
  • Historically higher interest rates than CDs
  • Tax-deferred growth
  • Optional, guaranteed lifetime income
  • Principal and growth available at term’s end
  • Full accumulation at death
  • Probate avoidance
  • No fees for this type of annuity

*In rare cases where insurance companies fail, new insurance companies that have taken over have fulfilled all original obligations for policyholders

Cons of Fixed Annuities

  • Limited annual liquidity, typically 10%
  • No market growth opportunity
  • Early withdrawal penalties
  • Limited opportunity for increase in income to fight inflation

Fixed Annuities Are Best For:

  • Wealth preservation/transfer
  • CD alternative
  • Conservative investors