What does a fixed annuity promise?

A fixed annuity promises a minimum rate of interest and fixed periodic payments. This financial product is designed to provide a stable and predictable income stream, often used for retirement planning. When you invest in a fixed annuity, the insurance company guarantees that your investment will grow at a predetermined interest rate, and upon annuitization, you will receive fixed payments over a specified period or for the rest of your life. This makes it an appealing option for individuals seeking security and consistency in their income, particularly in retirement.

Other options do not align with the nature of fixed annuities. Some may promise variable earnings influenced by market fluctuations, while others may not guarantee long-term payment stability. The defining characteristic of a fixed annuity is its combination of guaranteed returns and fixed payment structure, which offers safety against market volatility.