The Pros and Cons of Fixed Annuities for Retirement

When planning for retirement, many retirees look for ways to protect their savings and secure a steady stream of income. One popular option is the fixed annuity. But like any financial tool, there are pros and cons of fixed annuities to consider before deciding if they’re the right fit for your retirement strategy.

What is a Fixed Annuity?

A fixed annuity is a contract with an insurance company that guarantees a specific interest rate on your money for a set period of time. At retirement, it can provide reliable, predictable payments that last for life or for a chosen number of years.

Pros of Fixed Annuities

Guaranteed Income – Provides peace of mind knowing you’ll receive regular payments no matter how markets perform.
Safety from Market Volatility – Unlike stocks or mutual funds, fixed annuities are not tied to market swings.
Tax-Deferred Growth – Your interest earnings grow without being taxed until you withdraw.
Customization Options – You can choose payout options like lifetime income, joint life for spouses, or a set term.

Cons of Fixed Annuities

Limited Liquidity – Access to funds can be restricted; early withdrawals may result in penalties or surrender charges.
Inflation Risk – Payments are fixed, which means purchasing power may erode over time.
Lower Potential Returns – Compared to riskier investments, fixed annuities typically offer modest interest rates.

Are Fixed Annuities Right for You?

The best fixed annuities for retirees are those that balance safety, income needs, and flexibility. They are especially valuable for conservative investors who want stability and guaranteed payouts, but they may not be the best option for those seeking higher long-term growth.

Next Step: Every retirement plan is unique. At Advanced Capital Management, we specialize in helping retirees evaluate their options and design strategies that close the retirement income gap.