An insurance policy issued by an insurance company that guarantees a minimum interest and insures you will be paid a steady income for a certain time period or for as long as you live, depending on the option you select. Fixed annuities guarantee that you will not lose any of the money in your annuity when investment markets lose money.
Fixed Deferred Annuity
A fixed annuity where you can delay your payments until a future date and you do not pay income taxes on the interest you earn until you decide to take payments from your annuity.
Fixed Indexed Annuity
A fixed indexed annuity is a type of deferred annuity that earns interest based on changes in a market index. For example, a stock market index is a measurement of a section of the stock market and it is calculated from the price of the selected stocks.
Fixed Rate Annuity
A type of deferred annuity that earns a rate of interest that is determined by the insurance company. The rate is fixed and won’t change during a stated period of time, typically one, three, or five years.
Free Look Period
An annuity contract or life insurance policy provision that allows the contract owner to return the policy for a full refund if they do not want the policy. This period varies by state and is typically between 10 and 30 days.
Early withdrawal of a portion of your money without having to pay a fee to the insurance company you bought the annuity from. The maximum withdrawal is usually up to 10 percent of the value, but may vary by insurance carrier. A 10 percent federal tax penalty may apply to annuity withdrawals before age 59 ½, in addition to ordinary income taxes.
Full Retirement Age
The age at which a person may become entitled to full or unreduced retirement benefits.
Guaranteed Minimum Interest Rate
The minimum rate of interest the insurance company is required to pay on a fixed indexed, fixed rate annuity, or life insurance policy. The policy’s interest earnings must grow at least as much as the stated guaranteed minimum rate.
An annuity that begins paying out income to you soon after purchase. The amount of time between the purchase and payments may vary depending on whether you chose to receive payments monthly, quarterly, or annually.
A financial professional who is often appointed with multiple insurance companies and sells and services the insurance products they offer.
Individual Retirement Account (IRA)
A personal retirement and savings plan that allows you to set aside money for retirement. An IRA is funded with before-tax dollars: money on which you have not paid any income taxes. You pay income taxes on your IRA when you begin to receive payments.
Insurance Agents help protect individuals against certain risks. Life insurance and fixed annuities are agents’ core products. Some agents also sell personal insurance, including auto, homeowners, liability, and health. If trouble or tragedy strikes, your coverage may provide a cash payout. When you’re ready to retire, products like life insurance and annuities can provide an income for the rest of your life.