Is a Fixed-Rate Annuity Right for You?

If you're looking for a way to save for retirement without losing your initial investment, consider adding a fixed-rate annuity to your portfolio. With a fixed-rate annuity, you can:

• Receive a steady amount of guaranteed income that may help you cover your living expenses
• Potentially earn a higher interest rate than certificates of deposit
• Avoid the ups and downs of the stock market
• Diversify your portfolio

What is a fixed-rate annuity?

A fixed-rate annuity is an insurance product. You provide a lump sum payment or series of payments to the insurer, and your money grows at a fixed interest rate for a set amount of time. In return, you can withdraw the funds or opt to receive periodic payments for the rest of your life during the payout phase. The principal investment is guaranteed, and you can lock in a rate for a specified period of time. Guarantees are based on the claims-paying ability of the issuing company.

Is a fixed-rate annuity right for me?

Fixed-rate annuities may be suitable for people who do not intend to withdraw any income, principal or interest until they are closer to retirement age. That’s because you could face tax penalties if you make withdrawals before age 59½. In fact, withdrawals made prior to age 59½ are subject to a 10% IRS penalty tax, and surrender charges may apply. Gains from tax-deferred investments are also taxable as ordinary income upon withdrawal.

Other features

• Interest grows on a tax-deferred basis, meaning you don’t pay taxes until you receive the funds.
• Since you’ll likely be in retirement when you make withdrawals, you may be in a lower tax bracket. Consult your tax advisor for more details.*
• You can take withdrawals as a lump sum, withdraw the interest only or leave the funds to compound on a tax-deferred basis.
• You can name a beneficiary to receive the benefit.

We can help

Investment Services at UW Credit Union’s financial consultants can help you plan for your ideal retirement, including if a fixed-rate annuity is right for your situation. You’ll find our honest and transparent approach puts your best interest first. Meet our team and get in touch today to get the conversation started.