A fixed deferred annuity is a savings vehicle that can help you accumulate wealth. In many ways, this financial product is similar to a certificate of deposit. Once you are aware of the features and benefits of a fixed deferred annuity there is a good chance that you may decide to invest some of your money this way.
Features of a Fixed Deferred Annuity
A fixed deferred annuity is considered to be a low risk investment. As long as you make a good decision on where and how you invest your money, you should not run into much of a risk along the way.
The main feature and biggest benefit of a fixed deferred annuity is that the money you invest earns a guaranteed rate of interest. Your guaranteed rate will be locked in for a specific period of time, such as three years. Once this period expires, your rate may adjust regularly – usually once per year.
Along with the above, the money in your annuity accumulates on a tax deferred basis. This means you will not pay taxes until you withdrawal the money. It is important to note that you may be subject to a 10 percent penalty should you withdrawal funds before the age of 59 ½.
For long term investing, in which you are interested in earning money without much risk, a fixed deferred annuity makes good sense. These products are perfect for those who are saving for retirement, or interested in protecting their money after reaching retirement age.