Craig Strong | Strong Financial Network | Personal Finance Solutions

Fixed Annuities    < back to Personal Finance Solutions What is a fixed annuity? An annuity is a contractual agreement between an investor and an insurance company. The invested funds grow tax-deferred until withdrawn as a lump sum or in regular payments. If You Invest In A Fixed Annuity... the insurance company places your money in one of its investment portfolios. Then, throughout a specified period, your investment earns a guaranteed fixed rate of return. At the end of that period, your guaranteed rate may adjust up or down, depending on the interest rates prevailing at the time. Often the insurance company will also guarantee you the full return of your principal. (This guarantee depends on the insurance company's financial strength and stability.) Most people purchase annuities to provide supplemental retirement income. Typically, you may choose among several ways of annuitizing, or receiving regular payouts from the insurance company. However, if you withdraw money (beyond an allowed amount) prematurely from your annuity, you may incur a penalty or surrender charge. In addition, if you withdraw any earnings before you reach age 59-1/2, the IRS will charge you a 10% tax penalty. Therefore, annuities are considered long-term investments. For more complete information, please feel free to give us a call today!