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Annuities are a form of contract issued by Insurance companies and offered through Insurance agents. The investor pays into the annuity, and after a set period of time, the annuity pays the investor income. With fixed annuities, the principle is guaranteed. Annuities offer a safe, tax-deferred way to accumulate wealth, and are very popular as retirement savings plans.

Annuities can be structured in a number of ways; varying accumulation period, length of income payments and other factors. Investors get the security of a fixed interest rate when they choose a “fixed annuity” option. Issuing insurance companies guarantee a minimum interest rate for a set period of time with a fixed annuity option. Most of the companies also pay a minimum benefit. Since the payout is fixed over a period of time, investors are aware of the expected income over the payout period.

Fixed annuities can be paid out in various ways: for one purchased with a lump sum payment, fixed monthly income can immediatly be paid out to the investor. The owner receives a guaranteed, regular flow of income from his lump sum investment.

You can purchase a fixed annuity either with one lump sum payment or in installments. The traditional fixed annuity offers regular growth that does not rely on external, volatile factors such as stock market values or equity growth funds. Their return is in the form of regular interest payments compounded within the policy or made to the annuity owner.

Deferred annuities can be a useful tool to add to a retirement portfolio. The investor can choose to deposit a lump sum into the account where it will accumulate interest over time, or make periodic payments into it. After a set amount of time, the returns are paid out. This is a form of fixed annuity.New retirees sometimes neglect to calculate their income requirements after leaving a regular paycheck. An income annuity can sometimes be the perfect solution.

- Curtis McDowell