Fixed Deferred Annuities
- for investors seeking zero risk of principal loss from market declines
- similar in concept to a Certificate of Deposit (CD), fixed annuities offer both guaranteed principal - no risk of market losses, and pay a guaranteed interest rate for a specified number of years.
- after the initial interest guarantee period, interest rate may reset higher or lower than the initial rate, but will never be less than a contractual minimum guarantee
- no annual contract or investment fees
- surrender charges and/or market value adjustments may apply to withdrawals for a specified number of years after contract issue
- annuity contracts usually allow a portion of the contract value (typically 5%-10%) to be withdrawn each year, without surrender charges
- unlike CD's, annuities (even if purchased through a bank) are issued by life insurance companies, and are not guaranteed by FDIC insurance. Annuity guaranteed values are backed by the claims-paying capacity of the issuing insurer (click here for links to information about insurer ratings).
- state insurance guarantee associations may provide protection in the event that an individual insurer is unable to fully honor their contractual obligations to an annuitant (click here for more information).
