Fixed annuities work similarly to bank certificates of deposit (CDs), but typically offer higher interest rates because you are dealing with an insurance company rather than a bank. When you purchase a fixed annuity, the insurance company guarantees a specific interest rate for a set period, usually ranging from one to ten years.
Your principal is protected by the claims-paying ability of the insurance company, meaning your original investment is never at risk from market fluctuations. This makes fixed annuities particularly attractive for conservative investors who prioritize stability and predictable growth over higher-risk opportunities.
In Florida, fixed annuities are especially popular among retirees because the state has no income tax, allowing your tax-deferred earnings to compound more efficiently. When you eventually withdraw funds, you'll only pay federal income tax on the earnings portion.
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