![]() |
![]() |
![]() |
![]() |
![]() | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Course 401: Variable Annuities | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fixed Deferred Annuity | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
![]() | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Pros
Cons
Unlike a fixed immediate annuity, you don't begin taking payments from a fixed deferred annuity right away. Instead, the fixed deferred annuity functions something like a savings vehicle, where you can sock away money for retirement and earn a predetermined rate of interest. Fixed deferred annuities are sometimes called longevity insurance because you begin taking payouts later in life, after you've spent down your traditional portfolio of stocks, bonds, and mutual funds. A fixed deferred annuity is somewhat (but not entirely) like putting a CD inside of an IRA. Like CDs, these vehicles guarantee you a fixed--albeit relatively low--interest rate. They also offer some of the same tax treatment as a traditional nondeductible IRA receives: Your contributions are nondeductible, but your investment increases on a tax-deferred basis. You will also owe a penalty if you take your assets out before you're 59 1/2, as is the case with a traditional IRA. The key differences versus an IRA are that the IRS doesn't impose any limits on how much you can stash in one, and you don't have to take assets out by age 70 1/2. Some fixed deferred annuities also include a death benefit, payable to your heirs, if you die before you begin taking income from your annuity. Next: Variable Annuity >> |
![]() |
![]() |
![]() |
![]() |
||
![]() |
||
![]() |
![]() |
![]() |
![]() |
||
Learn how to invest like a pro with Morningstar’s Investment Workbooks (John Wiley & Sons, 2004, 2005), available at online bookstores. | ||
![]() |
||
© Copyright 2015 Morningstar, Inc. All rights reserved. Please read our Privacy Policy. If you have questions or comments please contact Morningstar. |
||