What Is A Fixed Annuity?
A fixed annuity is an annuity issued with a guaranteed interest rate period
which is less than the length of time that surrender charges last.
|Traditional Fixed Annuity|
A Traditional Fixed Annuity as show above has an Interest Rate Guarantee Period of 1 Year, the guaranteed
interest rate is 5.00%. Beginning in year 2 and each year thereafter the insurance company will declare a interest rate for that year.
The interest rate projected in year 2 is referred to the base rate.
All Traditional Fixed Annuities have a "Guaranteed Minimum Interest Rate". This GMIR is set at issue and
is guaranteed for the life of the annuity policy. The base rate, the rate the company will declare, can never
be less than the GMIR. This GMIR is a contractual guarantee.
Withdrawal Provision is a feature of almost all Traditional Fixed Annuities. This provision allows you
to withdraw a percentage of your account value or your initial premium each policy year. For example if
this Traditional Annuity had a 10% Free Withdrawal Provision at the end of each year you could withdraw up to
10% of your account value. For example, any money withdrawn in the third year over the 10% Free Withdrawal Provision
would be subject to a 3.00% penalty.
Withdrawal of any funds prior to age of 59 1/2 are subject to an IRS Penalty of 10%
of the funds withdrawn. This is in addition to any penalties incurred as part of
the annuity contract.