This type of annuity will earn a guaranteed rate of interest for a specific time period, such as one, three or five years. Once the guarantee period is over, a new interest rate is set for the next period. This guarantee of both interest and principal makes fixed annuities somewhat similar to Certificates of Deposit (CDs) purchased from a bank.
Unlike a typical CD, however, an annuity is not backed by the Federal Deposit Insurance Corporation (FDIC); its security is directly related to the financial health of the company that sells the annuity. That is why you should always check the financial security of the company. Please go to our company financial rating page for an explanation of the ratings system from some of the major financial rating companies.
You can purchase a fixed annuity by making a one lump-sum payment to purchase a single premium annuity, or by making ongoing contributions to a flexible payment annuity. This option allows you to make smaller payments over a longer amount of time.
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