Annuity Investment Types
Fixed annuities are annuities that offer a guaranteed fixed rate of return from funds that are primarily invested in government securities and high-grade corporate bonds. Interest rates on fixed annuities are guaranteed and typically range from 3% to 10% over a period of 3 to 15 years. Fixed annuities can earn substantially more compounded interest than CDs, money markets and even mutual funds.
Indexed Annuities (Fixed Indexed Annuities)
Indexed Annuities, sometimes called Fixed Indexed Annuities or Equity Indexed Annuities are similar to Fixed Annuities except the interest rate is tied to a market indices such as the S&P 500 index. One of the most attractive features of a Fixed Indexed Annuity is that annuitants can participate in market gains but do not participate in market declines. In other words Fixed Indexed Annuities have minimum guarantees for interest and income.
Unlike standard insurance products such as Fixed and Indexed Annuities… Variable Annuities are subject to regulation by the Securities and Exchange Commission (SEC). This is due to the fact that Variable Annuity funds are invested directly within securities and the investor is solely responsible for the investment risk. For this reasons all variable annuity owners are provided and advised to read the prospectus prior to investing. This gives the annuity owner flexibility in deciding the make-up of the variable annuity investment portfolio. The annuity owner can even accumulate investment funds within sub accounts each with their own investment portfolio with varying risk tolerances.
A CD annuity is an insurance product that incorporates the long-term interest rate guarantee of a certificate of deposit (CD) into an annuity, often used as a long-term tax-deferred investement to fund retirement programs. Interest earned on CD-Type Annuities is tax-deferred, allowing the CD Annuity value to grow more quickly than a typical Bank CD offering the same interest rate. CD Annuities are generally regarded as niche annuities that were created to address the concern of some potential annuity purchasers that fluctuating interest rates created too much uncertainty.