The intricacies of fixed annuities you must consider
Fixed annuities are not just best used by people nearing retirement, but by all people when the timing is right. fixed annuities rates rise in times of volatile market conditions, and beg to be taken advantage of. The best fixed annuities during the recent recession were paying upwards of 5% interest, which the bank locked in over a period of 10 years or more.
Even with the threat of inflation looming in the near future, a 5% fixed rate is hard to pass up. That kind of interest is usually saved as a 6 month teaser rate for low interest checking accounts, and there is no other investment with that kind of return for little to no risk. Deferred fixed annuities can and should be used as a vehicle for your discretionary income that has no other purpose. They usually beat CD rates hands down, and any other investment carries risk. Immediate fixed annuities have other purposes as well, such as Medicaid planning. One strategy is to pay a bank the large lump sum annuity payment immediately, thereby releasing those funds from your estate, and being able to qualify for Medicaid when you otherwise wouldn’t. You would then get the double benefit of an immediate monthly payout and medical coverage.
An immediate fixed annuity is usually used by those nearing retirement, but if you do not have a better investment, by all means, do not let “common knowledge” dictate your response. A good interest rate is a good interest rate, and benefits are benefits.
