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guaranteed annuityA guaranteed annuity is another way of referring to what is commonly known as a fixed annuity. Fixed annuities reflect the more conservative annuity investment option in that they offer a guaranteed growth compared to its variable counterpart, which is unable to make such a guarantee. A fixed annuity earns a guaranteed interest rate for a specific term, generally 1, 3 or 5 years. At the end of the pre-established timeframe, a new interest rate, better reflecting current interest rates, is setup for the next period. The fact that fixed annuities are guaranteed both in principal and in interest rates draws comparison with certificates of deposit (CDs) that are common investment purchases from banks. The major difference between the two investment vehicles is that a guaranteed fixed annuity is not insured through the FDIC like certificates of deposit. The "health" of fixed annuities is tied directly to the "health" of the company through which the annuity was purchased.The fees associated with a guaranteed fixed annuity are much more simplified and less confusing than those of a variable annuity. Most fixed annuity administrative expenses, including contract and maintenance fees, are accounted for following the end of the annuity's term when the provider declares a new interest rate. Aside from the necessary fixed annuity fees, they are a number of optional fees that can be used to purchase bonus features for your fixed annuity. Some of the more common bonus features requiring higher fees include (but are not limited to):
How does a guaranteed annuity differ from a VARIABLE ANNUITY ? |
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