Fixed Deferred Annuity- Pros and Cons

A fixed deferred annuity is one way of saving money or building your nest egg for your retirement, education of your children or for any other long-term goal. This annuity offers you many advantages, providing safety of your savings as well as a tax deferral. If you are one of those people who have a good business sense, you will most likely invest in a fixed deferred annuity because this offers you and other investors the best guarantee of premium for the accumulation of your retirement funds. A fixed deferred annuity also gives you the chance of having a competitive fixed rate of interest and there is no market risk to your premium.

If you purchase a fixed deferred annuity, you can enjoy several benefits and advantages. Your tax advantages lead the list because it allows you a tax-deferred growth and advantages during payout. This means that the tax bureau will not be at your throat and you can delay paying taxes until you have withdrawn your funds. What is more appealing is there are no taxes imposed on the interest earned from your investment.

Another benefit you can enjoy is having a steady income for Life. This makes the fixed deferred annuity stand out among other competitors in the market because you are guaranteed a steady income on a regular basis for as long as you live. In simple words, you cannot outlive your annuity.

Having no limits on contributions is another benefit you enjoy when you purchase the fixed deferred annuity. This means that the rule of limiting yearly contributions on other annuities that are not qualified does not apply here. Last but not the list, with the fixed deferred annuity you get to enjoy absolute safety of your premium. This means that whatever changes occur in the market, whether they fluctuate or decline, your premium is not affected.

The only setback with the fixed deferred annuity is like other fixed rate guarantee products, it provides you only with lower gains compared to the other existing products available in the equity markets.

However, if you are still young with a desire to accumulate bigger funds to prepare for your retirement or other long-term goals and needs, and if you are willing and daring to face market risks, you may look at the variable annuity or equity-indexed annuity again because it may serve you best.

It is therefore important that before you purchase an annuity, be sure that you understand what each type of annuity offers you. You have to take into consideration several aspects like your age, your goals and your braveness to face risks. Get to know the different features to check if a fixed deferred annuity suit your needs best.