A fixed annuity is a contract between you and an insurance company. You deposit a lump sum, and the insurer guarantees a set interest rate for a defined period — typically 2 to 10 years. At the end of the term, your principal plus interest is returned or can be rolled into a new contract.
How Fixed Annuities Work
Fixed annuities grow on a tax-deferred basis, meaning you don’t pay taxes on the interest until you withdraw it. This makes them an attractive alternative to CDs, especially for savers in higher tax brackets.
Traditional Fixed vs. MYGA
A Multi-Year Guaranteed Annuity (MYGA) locks in a guaranteed rate for the full term — similar to a CD. A traditional fixed annuity may have a declared rate that resets annually, which adds some uncertainty after year one.
Key Features
- Guaranteed principal — no market risk
- Tax-deferred growth
- Fixed interest rate for the contract term
- Surrender charges if withdrawn early
- Protected by state guaranty associations
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