What is a Fixed Annuity

Well the short answer is a guaranteed rate of return over time with tax deferral.  In terms I can understand – It is an insurance product.  You give the Insurance company your money, over time they give you some back at a promised rate of return, so if the market goes up, so does your money.  If the market goes down, it will stay flat and there is a guaranteed amount return – such as 5%.   This sounds awesome for sure, and works for a lot of people.  Also with a fixed annuity, you can withdraw certain amounts over time (after 55yrs old I believe), but you have to be careful there are tricks such as if you die it can go to the Insurance company if you do not indicate to leave it to a spouse or family member, and I am assuming that adding requirement gives you less money.  I also believe the spouse or family member only get a smaller portion of the withdraw, not the entire amount.   It kind of reminds me of a 401k, or even more so a reverse mortgage (because you loose it after your dead).    Different products are important for different reasons to different people, but after researching a fixed annuity, we have decided this is not for us.  I do like diversification, but at this point in our lives, we will stick with our 403b and 401k products thru work that we have.  Something in my head keeps saying – what if the insurance company went out of business, it is small – your work is huge and all pensions are protected by the state we live in – Michigan.  Also, The Employee Retirement Income Security Act, commonly known as ERISA, requires employers to meet certain requirements designed to protect your pension plan.   You also are entitled to all of the money you invested in your pension.   So a guarantee like that is hard to beat.

Glad to learn of this information, but No Fixed annuity at this time for us.

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