By: Mike Anderson
Submitted: 2011-05-16 00:36:31 | Word Count: 532
No risk, no return – this oft-touted phrase motivates us to work harder. But does risk always bring return? Yes, most of them time, it does. However, there are a few exceptions to this rule and fixed annuity is one of them. What are the fixed annuities? Well, the name says almost everything about them. They generate fixed income after regular interval. No risk is attached to them, still they produce huge return. This is not a myth but a reality that many will find hard to believe.
Annuities are products sold by the insurance companies and purchased by the annuitants. However, while buying the annuities, both the parties agree to a long-term association. The annuitants are obliged to invest at one go or through a streamline of payments. The insurers return the accumulated income either throughout a certain period or as long as the annuitants live. Of diverse types of annuities, fixed annuity is the preferred choice for the individuals who want to avert risk but gain a lot.
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When you buy an annuity, you get interest on your investment during the "accumulation" phase. However, the interest rate varies from one insurer to another. Moreover, this rate is greatly influenced by the current economic scenario as well as expected financial condition. With fixed annuity, the interest rate is pegged at a certain level and that is the reason why you draw a fixed figure every month. In other words, no matter whether the market is showing steady progress or not, you will get to gain the pre-determined volume of income.
However, with fixed annuity, it is possible to earn extra if your fund is working well in the market. So it will be a bonus for you. But the poor economic condition will not inflict any negative impact on the fixed volume of income. Studies have shown that the retired professionals are more interested to opt for the fixed annuity schemes. It is because they are reluctant to invest risk in lure of outstanding return. They have less appetite for risk and are in search of security always. However, they are equally enthusiastic about retirement annuity to secure their future. But such annuity provides greater benefits only if it is bought at an earlier stage of life.
Fixed annuity is far better than the variable type if you want to gain without experiencing any sort of troubles. However, as no risk is involved, so you happen to miss out on the chance of gaining a lot in the event of buoyancy in the market. On the other hand, variable annuities offer lucrative return if the investor's fund is doing well in the market. But then you have to take greater risk for massive gain. So, one has to analyze the financial needs and then only he/she can select a suitable policy. What works well for your friend may not be the right choice for you. So, act wisely, after all life is not about breathing but about living it to the fullest.
