If you have decided to use an annuity as part of your retirement planning, it is important to know that there are several types that you can choose. The two basic types that you will encounter are the fixed annuities and the variable annuities. We are going to spend some time looked at the fixed annuities and how they work.

When you sign up for a fixed annuity, you are basically getting a savings account with your insurance company. They are similar to CD’s you can get through a bank. They will have some kind of guaranteed interest rate, of usually between 5.5% and 6.5%. It will depend on the insurance company you go with and how much you are going to put into the account. This is lower than what you can find with the stock market on average, but when you are looking for a safe and predictable place to put your money, it can work.

In exchange for your premium, you will be able to choose to get a payout from the annuity for either a specific amount of time or for your whole life. This may sound good, but remember that there are some strings attached to this. The insurance agency is not going to just hand over all that money to you; they will have some rules in place that they want you to follow. You need to read all of the fine print before you determine whether the fixed annuity, or any other annuity, is the best option for you.

Depending on some of your goals when it comes to retirement, you may find that the annuity is not worth your time. That interest rate may be better than what you can get out of a savings account, but it is much lower than what the stock market is able to do, with 10 to 12% in return. It is often better to work with a professional financial planner and see if there are some other options, without all the fees and other issues of an annuity, to see whether you can find an option that better suits your financial needs.

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