A fixed annuity is a popular retirement and savings vehicle that was created for long term investors who want the stability of a guaranteed fixed interest rate with no risk that they will ever lose any of their principal. A fixed annuity contract lets the insurance company invest your lump sum or accumulated contributions into low-risk assets, providing a guaranteed return traditionally higher than that of a CD product. While a fixed annuity provides steady, guaranteed, and worry free growth, the real advantage is the tax-deferred benefits that a fixed annuity funded with qualified (pre-tax) money presents. A tax-deferred fixed annuity lets you defer all tax on earnings and principal into the future, providing exceptional growth due to the compounding process on earnings. While the interest on a certificate of deposit is taxed yearly , the fixed annuity is designed to encourage real retirement savings by providing a long term tax deference incentive for you to grow your investment.