A fixed income annuity is an investment product that directly connects the interest you make on your investments to your annuity. Unlike other annuities, a fixed annuity also protects you from losses when the stock market goes down.
With this type of investment plan you will receive all the benefits from stock market increases and be protected when the stock market recedes. If the market goes down you will still receive a percentage of interest on your initial investment, even though it is quite low. This protection is not offered with other types of annuities.
A fixed annuity is also known as an equity annuity. It is an insured product that can only be purchased through an insurance company. Annuities cannot be purchased on the market or through any other type of financial firm.
An annuity, once purchased, will provide you with a set income for life. Annuities are a great alternative for people who do not have pension plans or any other guaranteed retirement income. Depending on when you purchase an annuity you can begin to receive payments on it automatically or at a set date in the future. Your income will be based upon your age, the amount invested and the type of annuity that has been purchased.
There are fees associated with managing this type of annuity. The insurance company will take a percentage of your earnings each year. This is the only way that the policy holder can ensure that they can make the appropriate payments to you in the event that the market takes a down turn. There are other nominal fees associated with this type of investment, but they are comparable to the fees associated with the other types of annuities. Overall, this type of retirement investment suits many people. It is a guaranteed income with little or no risk. Stock investing alone leaves you subject to the whims of the market. An annuity provides a guaranteed income, regardless of market performance.