If you have decided to purchase an annuity, it may be disheartening to learn that you don’t have enough savings to buy a single premium immediate or deferred fixed annuity. For an immediate annuity, the single premium required to purchase it may be completely out of your reach. Single premium deferred annuities usually require smaller deposits, but even so this amount may be too much for you. By foregoing an immediate annuity, and using your set-aside money to buy a flexible premium deferred fixed annuity, you can take advantage of an annuities’ safety, stability and tax-deferred properties with a smaller initial investment.

With a flexible premium, you can make contributions to the fixed annuity whenever you want, throughout the year. There are usually two deposit amount restrictions – there is a minimum amount needed to initially purchase the annuity, sometimes only $1,000, and then there are additional contribution minimums, typically $100. And if you are using after tax funds to purchase your annuity, there are no limits to the amount you can contribute to a fixed annuity…unlike an IRA or 401k.

Once your money is added to the annuity, it grows on a tax deferred basis. You will not pay any taxes on the interest earnings while your money remains in a fixed annuity. When you begin receiving payments or taking withdrawals, you will be responsible for federal and state, if applicable, income taxes on any interest earnings withdrawn. Having funds grow tax deferred in an annuity leads to a higher account balance at the end of the fixed annuity time period, because of the additional compounding that occurs on the money that would normally need to be paid as taxes.

A deferred fixed annuity can put you on track with saving for retirement, especially if you are risk adverse. Fixed annuities have guaranteed interest rates that are locked in for a number of years. As an enticement to purchase a fixed annuity, many issuing insurance companies also offer upfront bonuses – basically, a free percentage tacked on to your premium deposit, just for becoming a customer. This bonus increases the amount that you earn over time. After the fixed annuity time period is complete, you are able to roll your annuity over into an immediate annuity, and begin receiving payments, or you can move the funds into another fixed annuity.

To learn more about a flexible premium fixed annuity, contact the Annuity Specialists at 1-800-994-3023.