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When you buy a fixed income annuity, an insurance company promises to pay you a guaranteed regular income for the period you select. Your premium goes into the general account of the insurance company, along with premiums from other investors and other company revenues.
The insurer invests your money in fixed income securities such as government and corporate bonds and residential mortgages.
With a traditional fixed income annuity the amount you receive remains the same for the rest of your life. So you don’t have to worry about your payment ever decreasing. However, because you lock in the same size check every month for the rest of your life, your income may not keep up with the increases in your cost of living.
To help you keep up with increases in the cost of living, some newer annuities offer fixed payments that automatically increase each year by a specified percentage or that increase with inflation. With these types of fixed annuities your income payments start out much lower than with a traditional fixed income annuity.
Before buying a fixed income annuity, check a company’s financial strength ratings and read all the informational materials, including the contract itself. Also compare the payment options and amounts. Insurance companies use different methods to figure their annuity rates, so payment amounts vary from company to company.
Article is for educational purposes only and is not intended to provide specific tax or legal advice. For answers to tax questions, please see your tax professional. For legal questions, consult an attorney.
Representatives are registered, securities are sold, and investment advisory services offered through CUNA Brokerage Services, Inc. (CBSI), member FINRA/SIPC, a registered broker/dealer and investment advisor, 2000 Heritage Way, Waverly, Iowa 50677, toll-free (800) 369-2862. Nondeposit investment and insurance products are not federally insured, involve investment risk, may lose value and are not obligations of or guaranteed by the financial institution. CBSI is under contract with the financial institution, through the financial services program, to make securities available to members. CUNA Brokerage Services, Inc., is a registered broker/dealer in all fifty states of the United States of America. The Representative may also be a credit union employee that accepts deposits on behalf of the financial institution.
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