Part 7 of 17

What is a Fixed Annuity?
Fixed annuity, also known as a multi-year guaranteed annuity (MYGA), provides a guaranteed rate of return for a predetermined period of time. It is most similar to a Certificate of Deposit (CD) that is offered by a bank or other FDIC insured institution, except that it is offered by an insurance company. In addition to providing a guaranteed rate of return for the investment term, fixed annuities, and all annuities, give you the opportunity to turn those savings into lifelong pension-like income. The fixed annuity guarantee is backed by the financial strength of the insurance company, which is best understood through its financial rating.
FYI, fixed annuities are known by a variety of names including:
• fixed rate annuity
• fixed annuity
• deferred annuity
• multi-year guaranteed annuity (MYGA)
• single premium deferred annuity (SPDA)
Finding the Right Fixed Annuity
The three most important considerations in selecting a fixed annuity also known as a multi -year guaranteed annuity or (MYGA) are the guaranteed annual rate, insurer rating, and the investment term.
Guaranteed Rate: This is the effective annual rate that your money is guaranteed to grow during the investment term assuming you hold the contract to maturity.
Insurer rating: All reputable fixed rate annuity providers are rated by A.M. Best. Some might also be rated by Standard and Poor’s, Moody's, and Fitch. The highest A.M.Best rating is A ++, then A+, A-, B ++, B +, etc. With long term annuity purchases (like an income annuity) it's advisable to choose insurers with an A or better rating, but with short term annuities like fixed annuities a B++ or B+ insurer can make sense for those looking to get the top yields.
Investment term: Terms range from 3 years to 10 years. During that period of time, you'll receive a guaranteed rate, but we'll have limited access to your funds. Typically, but not always, rates increase as a term increases.

Thought for the Week

If this were the last week of your life, would you want to do what you were about to do this week?