Finance Articles

Insurance companies issue annuities, a form of investment that are generally offered via Insurance brokers. Once an investor pays into the annuity, the annuity earns interest for a set period of time. With fixed annuities, the capital invested is guaranteed. They are a safe, popular and tax-deferred way to increase your wealth.

Annuities can be structured in a number of ways; varying accumulation period, length of income payments and other factors. Investors get the security of a fixed income when they choose a "fixed annuity" option. Issuing insurance companies guarantee a minimum interest rate for a set period of time with a fixed annuity option. Most of the companies also pay a minimum benefit. Since the payout is fixed over a period of time, investors are aware of the expected income over the payout period.

If you decide on a fixed annuity, it can either be funded with one lump sum payment or with a series of smaller payments over the course of time. The returns from traditional fixed annuities are guaranteed to increase as they do not depend on increases in the stock market or other equity investments. There is a steady return of interest and also a steady future cash flow to the investor from the annuity.

One option for an individual with fixed annuities is to choose an immediate income annuity. After making a lump sum payment, the investor then receives immediate fixed monthly income, thus turning a lump sum into a retirement income stream.

When investing in a deferred payment annuity, you may choose to deposit a lump sum at the beginning which builds interest over time. Or, you may deposit money into your annuity over the course of time, and your returns will be paid out to you after a set period. This type of fixed annuity is commonly used by investors as a savings plan for retirement. The annuity value continues to grow and compound while in deferral. When additional income is needed, the investor can choose a payout structure to suit his needs.