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Fixed Annuity Product and Rate
An insurance and retirement product that pays a fixed rate of interest to an investor is a fixed annuity. These annuities have become popular investment products because of their advantage over traditional fixed income investments.
The securities in the annuity are invested by the insurance company into fixed rate securities. This allows the company to calculate a rate to pay on your fixed annuity. These are different than variable annuities, which pay a fluctuating payout based ont he performace of common stock funds in the separate account.
Rate Of Return
This is a pre calulated rate during the accumulation phase (contribution phase). The interest level is based on the investment portfolio product value of the insurance company. This can be adjusted during the annuity phase of the plan.
There is interest and inflation risk with fixed products such as these. As interest rates rise, the value of the underlying portfolio of the insurance company will go down. Inflation risk occurs when money is invested directly or indirectly into fixed income products. The value of money that can be grown in a variable annuity or other stock investments can grow above the cost of inflation.
Fixed Indexed Annuity Product - Information and product discussion blog
Copyright  2006 American Investment Training, Inc.
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