People that want the most for their investment dollars but also want a safe guaranteed investment are looking towards fixed annuities more often these days. There are a great many reasons to choose a fixed annuity over a CD. Often the rates are higher and the annuity gets tax-sheltered growth. Not all annuities are alike. When you select an annuity, shop just like you would for any other purchase. You want to buy the best annuity on the market.
Of course, the interest rate is normally the first thing most people check but there's more differences when you compare fixed annuities than just the interest rate. Interest rate or rate of return is a good place to begin, but you need to look further to find the best fixed annuity for your situation.
One example is the length of time the company guarantees the initial rate of return. Sometimes the first year rate contains a bonus rate, after that first year, the annuity rate drops down to a much lower rate, sometimes not competitive with other fixed annuities.
Find out what the minimum guarantee is for the product. In times when the interest rate is smaller than one, a minimum guarantee of two or three looks excellent.
Request information on the minimum amount the contract requires and the minimum initial investment. Some companies offer bonus interest rates for larger amounts of money but give a respectable rate for lower investments. Other companies won't even allow you to open an annuity if you don't have enough funds for their minimum.
The ability to add more funds is also important. Many people find that they like the easy carefree annuities, particularly as they age and want less complication in their finances. They often want to add additional funds. The ability to add to a fixed annuity and the minimum additions become important in this case.
Surrender charges, like early withdrawal penalties are important when you invest your money. Some companies surrender period is shorter than others are. You might find an annuity that allows you to invest for one year and then remove the funds without penalty. Other products may have charges that last not just your lifetime unless you take annuity payments.
See how your heirs have to take the proceeds. There are a few annuities on the market, which only allow heirs to annuitize or they face a stiff surrender charge. These are not the best annuities unless that fits your wishes. Some parents are delighted to know that their children won't be able to spend the funds all at one time.
Even if you never plan to remove money from your annuity, it's comforting to know you have access before the end of the surrender period. The amount of penalty free withdrawal varies from company to company with some companies offering interest only and others allowing you to take as much as 10 percent per year cumulative if you don't take it in one year. Most companies offer withdrawal right somewhere between the two extremes.
Shopping for an annuity is the same as any other major purchase. It requires that you shop carefully and look for features that are important for you. Even though you may talk to an insurance agent and look at the products he offers, check around for other products to see if his are the best for your situation.
Christopher Tyler educates on the topic of fixed annuities and other investment options for retirement. As the economy slides into the worst recession in decades more and more investors are looking for safe options to grow their investment for retirement. Visit our site to learn more about the fixed annuity as a viable investment for retirement.
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