Fixed annuity – safe or dangerous

Fixed annuityFixed annuities are particularly thought of because of their safety. You can’t really lose money due to stock market declines when you yourself are a part of it. Yet, fixed annuities are not always safe.

Even though the chances of losing money in the market do not arise in case of fixed annuities, one thing that you must keep in mind is that there are other aspects of them that may make them unsafe. The first being there is lack of liquidity. Yes there is a tax postponement component, however, you must always consider that if you need the money, you might be needed to pay certain amount/amounts of penalties to collect it. This is called surrender charges. Often these charges can turn out to be quite high on your annuities. This is what makes them riskier as far as liquidity is concerned.

The rating of the particular insurance company is also a major factor of consideration. Though it is known that ratings of companies are not at all the final word to be believed as far as safety is concerned, yet doing your research is always the best option. The safety of your annuities is directly related to the safety of the company, hence it is essential that while choosing an insurance company you do your diligence and that you do it properly.
Yet, it is not all bad. The current returns generated on fixed annuities is one of the biggest positives of entering into such an account. This leads to a consistent and sufficient income stream to compliment your other income, be it after retirement or before.

At the end of the day, entering into a fixed or a variable interest annuity should be a decision left on you for which the necessary research and preparations can be taken by only you. Your investment needs is almost a major factor on which this decision would depend.