What is a Fixed Deferred Annuity?

     A Fixed Deferred Annuity is a contract between you and the insurance company which pays a guaranteed current interest rate. The interest rate may be guaranteed for one or more years and earns compound interest. The interest earnings compound on a tax-deferred basis.

     Fixed deferred annuities are offered either on a single premium basis, i.e. you give the insurance company a lump sum premium payment, (typically $5,000 or more) or on a flexible premium basis, i.e. you pay a lower re-occurring premium payment on a monthly, quarterly, or annual basis. In addition to tax deferral, fixed deferred annuities offer safety of your premium. Fixed deferred annuities offer a current interest rate which may never be less than a lifetime minimum guaranteed interest rate (typically 3%).

    The current interest rate is declared and guaranteed by the insurance company. Thus your premium in a fixed deferred annuity is not subject to market risk associated with volatile financial markets. Fixed deferred annuities have penalties for early withdrawal called surrender charges or withdrawal charges. These charges typically decline over the length of the surrender charge period.