Fixed annuities offer guaranteed payments for retirement income. A fixed annuity contract lets you make a single or several payments to an annuity provider. The provider vouches to pay fixed returns for the contributions, regardless of the market performance. You will get to know more about annuity meaning in the following sections. 

However, annuities are usually liquid investments, and some of them charge pretty high fees. Given below are a detailed explanation of what fixed annuities are and their advantages. 

What is a fixed annuity? 

Fixed annuities are the kind of annuity contracts that offer guaranteed returns on the contributions made as a lump sum over a certain time period. The accumulation phase is the term used to denote the period during which you make the contributions to your fixed annuity. The distribution phase is the period during which withdrawals are made. Hopefully, this clears up annuity meaning for you. 

Broker-dealers, banks, insurance companies, and financial services companies sell fixed annuities. Fixed annuity meaning can be easily explained by calling it a kind of supercharged deposit certificate that gets you a fixed rate of returns.  

Additionally, you can opt for guaranteed payments for a certain number of years or get a lump sum amount. Keep in mind that the terms of the contract restrict the time limit on guaranteed payments. It depends on the policy whether you will get paid for the rest of the lifetime or a particular number of years.  

How does a fixed annuity help? 

Now that you know about annuity meaning, you already have an inkling about how it helps. So, there are three main aspects through which a fixed annuity helps. 

Simplicity factor: 

The simplicity factor is the biggest benefit of fixed annuities if you know and understand the annuity meaning. It is easy to compare rates and terms to figure out the right offer for yourself. On the other hand, variable annuities and indexed annuities are pretty complex and full of underlying fees. 

Of course, it’s not that all variable annuities and indexed annuities should be avoided. However, the clarity of the contract terms makes it easy to recognize good deals on fixed annuities.  

Assured returns: 

Signing up for fixed annuities means that the annuity gets you minimum investment returns for the contract’s lifetime. The rates you get for a fixed annuity is usually higher than the savings account. In fact, annuity meaning is also that it is not FDIC insured. 

However, annuities remain insured in several other ways. The best thing you can do in this regard is to buy annuities from well-reputed companies that don’t have high chances of folding. 

The ability to predict 

As fixed annuities earn set returns, it helps you to predict the amount that you can earn in future. Thus, it gets easier for you to do your retirement planning.  

In the case of variable annuities and indexed annuities, the actual return is based on how different investments perform. You can either earn much or more, but there won’t be any clarity about your future income. Thus, it is a better idea to consider fixed annuities in such cases.