The basic difference between the Fixed annuity and the fixed deposit
By: Mike Anderson
Submitted: 2011-08-01 22:14:13 | Word Count: 538
The market is now filled with various kinds of investment plans. This actually adds to the confusion of the customers who get confused about which investment plan to go for since there are so many options available. Of all the different investment plans available in the market, there are several sub categories that you can choose from. Annuity is one such investment that guarantees you some amount of returns over your life and also offers a return to all your beneficiaries after your death.
Annuities are of different types and form. Two of the most popular varieties of annuities are the fixed annuities and the variable annuities. The fixed annuities is one of the most popular form of annuity investment that is again sub categories like the deferred annuity and the immediate annuity. The deferred annuity pays to you after the maturity of the annuity and the immediate annuity provides immediate payments as per the market. Thus you can make a choice from amongst these annuities, it is needless to mention that the immediate annuities offer greater returns as there is greater risk in such type of annuities as it depends on the market fluctuation. In case of the deferred annuities, there is minimum risk and thus the annuity rates are much lower.
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The immediate annuity as well as the fixed annuity offers an amount that is decided right at the time of investment. The deferred annuity on the other hand offers the payment at a later yet pre-determined date. The fixed annuities are very similar to the fixed deposits that you get from the banks. It is safe as in terms of investment for the entire lifetime. Apart from this similarity, the other factors of the fixed annuity and the fixed deposits are quite different from each other.
There are some other factors that are the characteristic of the fixed annuity. The fixed annuity plans offer the fixed annuity rates to you. The annuity rates vary as per the market condition during the tenure of its maturity. The annuity rates offered by the fixed annuity are much higher than that of the rates that are offered by the fixed deposits. The main difference lies in the fact that it takes much longer for the annuities to gain maturity.
Liquidity is another aspect that you should consider when investing in the fixed annuities. The normal fixed deposits provide with the limited liquidity as the entire amount is kept locked for the tenure of the fixed deposit. Any kind of prepayment withdrawal might lead to a pre-payment penalty charges on your amount. In case of fixed annuities though, you have the flexibility to withdraw the entire amount in case you need liquidity during the surrender period.
There are certain taxation policies that vary with the fixed deposits as well as the fixed annuities. The tax deferred fixed annuities charge only the tax if you withdraw the amount for any reason. Thus this helps in doing some tax planning from your end so that you can grow your money.
