Forward Bank

A fixed annuity can help you reach your long-term goals, including retirement, by providing a guaranteed stream of income for a specified period of time or even for life. Here are a few key things to know about these unique products.

Did you choose a solid provider?

Private annuity contracts are not guaranteed by any federal agency, and while most states provide some protection to their residents if insurance companies doing business in those states fail, it is often capped. Therefore, if the insurance company that issues an annuity contract fails, you are not necessarily protected from financial loss. To mitigate this risk, it is important to choose an annuity wisely.

Over what time period do you need the money?

You can select a payout time period. You may only need an annuity for 10 or 20 years, or you may want it for life.

What payout option do you want?

You can receive your payout from a fixed annuity in several ways. For example, you can take a lifetime stream of income, or you can take systematic withdrawals, the amount of which can be adjusted.

What fees will you pay?

Most fixed annuity fees are factored into the annual percentage rate you are quoted, but be sure you know what they are. Do they include the insurance company's administrative expenses? What about the profits to the insurance company and agent?

Do you understand purchasing-power risk?

Most fixed annuities do not have cost-of-living adjustments. As a result, the purchasing power of your monthly payment may decline over the life of the annuity because of inflation. If necessary, you can purchase an annuity with inflation protection.