What is a tax-deferred fixed annuity?
All annuities sold by insurance companies are tax deferred. The term, “tax-deferred annuity” refers to a tax-favored savings program available under code section 403(b) to public school employees and the employees of nonprofit organizations. A fixed annuity contract is a contract between you and an insurance company in which the company, in exchange for a single or flexible premium, guarantees a fixed payment at a future date. Fixed annuities are “fixed” in two ways: (1) The amount you invest earns tax-deferred interest at a guaranteed rate (typically 1% to 3% under long-term U.S. government bonds) while your principal is guaranteed not to lose value. (2) When you withdraw or opt to annuitize (begin taking monthly income) you receive a guaranteed amount based on your age, sex, and selection of payment options. Be careful to ask about the many fees attached to every annuity contract. Most companies do not charge an initial commission, or load. Instead, they levy a substantial surrender