What are the Pros and Cons of a Fixed Deferred Annuity?

Fixed deferred annuities are a method of saving money for future when it will be needed for any important thing like education of child or retirement. The fixed deferred annuity provides a major advantage of safety of premium and tax deferral. The investors who prefer investing and looking to accumulate funds for retirement with guarantee of premium, more likely to invest in fixed deferred annuity. This annuity guarantees competitive fixed rate of interest and no market risk to premium.

Benefits of Fixed Deferred Annuities

Tax Advantages: Annuities allow for tax-deferred growth, along with tax-advantaged payout on annuitization. Until the funds are withdrawn the interest earned are not taxed.

Income for Life: The only products in the market that can guarantee a stream of payments are annuity and cannot be outlived by the annuitant.

Safety of Premium: Fixed annuities and indexed annuities contain provisions that allow the owner to minimize the risk during market decline.

No Limits on Contributions: Nonqualified annuities are not subject to the same rules limiting annual contribution amounts to IRAs and qualified plans.

The major disadvantage of a fixed rate deferred annuity is that fixed rate guarantee-type products have provided lower gains than those available in the equity markets.
Their are various factors that are important in determining whether a fixed deferred annuity is right for you like your age, aversion to risk and retirement goals. Their may be two case first is if you are near to retirement and desire to preserve your accumulated assets in a safe plan or vehicle then the fixed deferred annuity may be the best choice.

Secondly, if you are in younger age and desire to accumulate significant funds for your long-term retirement needs and are willing to take greater risk, an equity-indexed or variable annuity might prove a better alternative at the present time.