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Fixed Annuities are insurance contracts between you and an insurance company. There are many uses for fixed annuities but we wanted to focus mainly on the principal of saving money. If and when you obtain employment or even start a business that provides you with enough income to be considered excess income, there are some very important choices that have to be made. Most people if not all will look at toys and other luxury items that only are purchased because that purchase would be considered reaching a milestone or income level to be able to afford it. There are watches that tell time and there is a Rolex watch. Both will tell time, but one is purchased as a status symbol to tell time in a luxury fashion. You get my idea but many who we meet have every luxury item in the world and an empty bank account or retirement account. The concept of saving money started a long time ago when the wealthy had too much to spend, so they started banks to lend their money to make more money. What a concept!

Fixed Annuities are a great investment for the lower level or novice investor to get exposed to the concept of annuities and yes insurance companies will pay you interest for use of your money. It is not a new concept but with a different type of institution. When you understand that banks offer CD’s and insurance companies offer annuities, it is up to you to choose where you want to start saving. We strongly suggest fixed annuities because they often require a smaller minimum deposit with terms that enforce the savings mentality. Banks have the same concept called early withdrawal penalties, while insurance companies have named these surrender charges. Surrender charges differ in relation to the term of a fixed annuity just like early withdrawal penalties differ with the CD term and deposit amount.

Once you have decided to save money, we encourage you to read and discover the fixed annuity rates vs. cd savings rates and you will be pleasantly surprised. You can start a laddering strategy using fixed annuities with varying terms.

An example would be to take 3 year, 5 year, 7 year, and 10 year fixed annuity product and to start each of them the same year. It would be up to you and the insurance company and the products they offer to optimally work this out but if you find the right carrier, your strategy is on it’s way.

The 3 year fixed annuity will mature in 3 years, so roll that over to a 5 yr fixed annuity. This leaves 2yrs left for the original 5 yr annuity, 5 yrs left of the original 7 yr annuity, and 7 yrs left on the 10 year annuity. When the original 5 yr annuity matures, roll that to a 7 yr annuity and so on and so on. You will never have a period of time longer than 2-3 years with out some liquidation options. We feel that if you have access to the cash, you will most likely spend it.

Fixed annuities are great first time investments for all ages to consider how insurance companies can help you save money, compound your interest, and realize a savings strategy to keep you partially liquid every couple of years. Fixed Annuity rates do change often, so if you are thinking about starting a strategy or breaking up a lump sum and have it work for you over time, we suggest consulting with an Annuity Broker to see what options are available at that time.

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