One of the most common uses for a fixed annuity is in retirement planning.  Even though the fixed annuity comes with warning signs (particularly on the internet), it can be a powerful addition to any comprehensive retirement plan.

Simply stated, a fixed annuity is an insurance product that makes a fixed payment for a specific period of time.  Many contracts can be established as a life annuity, and provide guaranteed income for the duration of the annuitant’s life.

Fixed annuities often get a bad rap on the internet.  The primary reason for this is that the sale of annuities has been frequently abused by overzealous and greedy insurance agents.  Traditionally, the commissions on a fixed annuity contract are higher than traditional life insurance or other insurance products.  As such, the incentive for agents to oversell the annuity has become rather prevalent.

The best way to protect yourself for this type of situation is to fully understand and agree with the intent of the annuity contract before your purchase it.  It should have a clear and designed purpose, and should not be intended for temporary residence of your retirement funds.

A properly designed retirement plan that uses annuity contracts will have a clear cut purpose and focus.  The deferred fixed annuity can provide a secure and guaranteed income for the lifetime of the retiree.  Though the ability to pull money out of the account earlier than intended is difficult, if the retirement plan is comprehensive, the need shouldn’t arise.

Because of the guaranteed payments and the stability of the insurance industry, the fixed annuity contract is one of the lower risk investments you can make.  The last thing that you want to do with your hard-earned retirement income is risk it away in dangerous and aggressive investments.  Protecting your principal is the name of the game during retirement.