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Annuities can be a valuable part of a diversified investment portfolio, providing a guaranteed stream of revenue in the future. To meet the needs of a variety of investors, insurance companies offer several different products, but the most popular are fixed and fixed indexed annuities. Either one may be right for you, depending on your goals and risk level, but it’s important to understand the differences before deciding which to choose.

What Is an Annuity?

In their simplest forms, annuities are agreements in which you invest a certain amount of money with an insurance company. In exchange, the insurer will guarantee a regular series of payments, usually starting on a specific date in the future. While the growth rate may not be as high as mutual funds or other investment vehicles, the guaranteed revenue makes these products attractive to many people with low-risk tolerance.

Fixed Annuities

financial plannerDue to their simplicity and guaranteed rate of growth, fixed annuities are the most popular option. These programs offer a guaranteed rate of return over a specified period, which can either begin immediately or sometime in the future. Contributions to fixed annuities are also tax-deferred, much like a 401(k), which means you won’t pay taxes on those funds until you start receiving payments.

Fixed Indexed Annuities

In many ways, fixed indexed annuities are similar, but they offer a potentially higher return rate. Instead of a fixed interest rate for the life of the program, a portion of your payments is tied to the performance of a particular stock index, like the S&P 500.

To provide predictability, the insurance company will guarantee a minimum payment, regardless of market conditions. However, payments for these programs may also be capped, so your payments likely won’t exceed a certain amount even if the market outperforms expectations.

 

With a wide range of both fixed and fixed indexed annuities, Premier Financial Agency has the tools to help protect your financial future. Their agents have over 14 years of experience serving families throughout the Mid-South Region, and will provide the personal attention and detailed advice you need. To request an insurance quote or discuss your financial planning options, visit their website or call (870) 740-8661.

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