Should You Buy a Fixed Annuity?
Jan 18, 2023
Blueprint Income Team
A fixed annuity provides a safe, tax-advantaged way to earn a good return on savings needed in the near future, similar to a CD. We’ve created this quick checklist so you can know if a fixed annuity is a good fit for you.
- Use our checklist to determine if you should buy a fixed annuity
- A fixed may be a good fit for you if you’re looking to grow your retirement savings tax-deferred
- Fixed annuities generally offer higher rates than CDs with the same contract length
- Consider a fixed annuity if you want guaranteed growth, but want to preserve some liquidity
A fixed annuity is a tax-deferred retirement savings vehicle that provides fixed asset accumulation, much like a CD. With a fixed annuity, you can invest your savings over a specified time horizon (typically 3 to 10 years), earning a fixed return. The interest earned in your fixed annuity is not taxed until withdrawn, and your principal is guaranteed.
Fixed annuities are also known as Multi-Year Guaranteed Annuities (MYGAs), fixed rate annuities, fixed deferred annuities, and single premium deferred annuities.
After years of working with clients, we’ve built an easy checklist to help you decide if a fixed annuity is a good fit for you:
- You have money to invest for at least 3 years
- The money you’re investing is earmarked for retirement or to be passed on to heirs
- You’ve already maxed out your IRA or 401(k) contributions
- You want greater certainty and principal protection
- You have other assets in the market exposed to higher expected returns
- You want to preserve some liquidity
Sometimes it’s easier to see what you are instead of what you aren’t. If you can check off these boxes, a fixed annuity may not be a good fit for you:
- You need to access your money within 3 years or before age 59½
- You aren’t maxing out IRA or 401(k) contributions
- You’re interested in growth investments
If you plan to annuitize your fixed annuity upon maturity, it’s worth considering purchasing a Deferred Income Annuity (DIA). Read more about Deferred Income Annuities here.
This checklist is a good outline, but we know that it’s sometimes easier to sort through the specifics of your financial future with someone over email or phone. We’re always here to help! You can contact us at [email protected].
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Blueprint Income Team
We are a team of finance, insurance, and actuarial professionals working to make it easier for everyone to achieve a steady and comfortable retirement. We write about annuities (the good and the bad) and provide strategies to help Americans prepare for retirement.