fixed annuity

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Fixed Annuity

An annuity that allows the annuitant a fixed return for the life of the annuity. Like any annuity, the annuitant buys into a policy, either with a lump sum or premiums over a period of time. When the annuitant reaches a certain age, or retirement (whichever is greater), he/she begins to receive payments. Typically, the insurance company issuing a fixed annuity invests the premiums in low-risk investment vehicles such as bonds. This results in a smaller likelihood that the insurance company will be unable to make the payments, but also exposes the annuitant to inflation risk. See also: Variable annuity.

fixed annuity

A stream of unchanging payments for a specific period or for an individual's lifetime, depending on the terms of the annuity contract. Fixed annuities are sold by insurance companies to people who desire a fixed income. Also called guaranteed-dollar annuity. Compare variable annuity. See also hybrid annuity.

Fixed annuity.

A fixed annuity is a contract that allows you to accumulate earnings at a fixed rate during a build-up period.

You pay the required premium, either in a lump sum or in installments. The insurance company invests its assets, including your premium, so it will be able to pay the rate of return that it has promised to pay.

At a time you select, usually after you turn 59 1/2, you can choose to convert your account value to retirement income.

Among the alternatives is receiving a fixed amount of income in regular payments for your lifetime or the lifetimes of yourself and a joint annuitant. That's called annuitization. Or, you may select some other payout method.

The contract issuer assumes the risk that you could outlive your life expectancy and therefore collect income over a longer period than it anticipated. You take the risk that the insurance company will be able to meet its obligations to pay.

References in periodicals archive ?
Compared to second quarter 2008: Indexed annuity sales rose 20% in second quarter 2009; book value and fixed income annuities rose 10% and 2%, respectively; but MVA annuity sales fell 5%.
(Note: by dollars, first-half 2009 sales were: book value annuities, $33.2 billion; indexed annuities, $15.3 billion; MVA annuities, $10 billion, and fixed income annuities, $4.1 billion.)
"By including fixed income annuities in a retirement income account, retirees may achieve greater growth potential while also addressing their desire to avoid running out of money in retirement and to leave a legacy for their spouses or children," he adds.
Gradually increasing the guaranteed income component through annual purchases of additional fixed income annuities can:
* Enable retirees to purchase fixed income annuities at increasingly older ages with the possibility of increased income payout rates (income annuities often pay out higher amounts at older ages.)
The alternative to purchasing longevity insurance, fixed income annuities, variable income annuities or one of the living benefits offered in deferred variable annuities, is investing in a conservative mix of stocks, bonds and cash and withdrawing from them at a low annual rate, such as 4% or 5%.
Fidelity Investments Life offers both variable and fixed deferred annuities, variable and fixed income annuities and term life insurance with variable features and guaranteed minium death benefit options, and also distributes third-party offerings.
Products: Fidelity Investments sells both variable and fixed deferred annuities, variable and fixed income annuities and term life insurance with both variable features and guaranteed minimum death benefits options, as well as distributing third-party products.