Income Tax Rates

People that want the most for their investment dollars but also want a safe guaranteed investment are looking towards fixed annuities more often these days. There are a great many reasons to choose a fixed annuity over a CD. Often the rates are higher and the annuity gets tax-sheltered growth. Not all annuities are alike. When you select an annuity, shop just like you would for any other purchase. You want to buy the best annuity on the market.

Some of the items to look for in a fixed annuity are not as transparent as the interest rate. While the interest rate is a place to start, you need to look at certain specifications in the policy.

One example is the length of time the company guarantees the initial rate of return. Sometimes the first year rate contains a bonus rate, after that first year, the annuity rate drops down to a much lower rate, sometimes not competitive with other fixed annuities.

Each product has a minimum guaranteed rate of return also. This is the rate that no matter what the economic conditions, the company promises is the lowest you'll ever receive. When interest rates at the bank drop below a percent, the minimum guaranteed rate becomes important.

Investigate the minimums if you're looking for an initial investment. Some companies charge a service charge if you're under a specific amount. Others simply won't take your because it's too small. Not all companies need you to be a Rockefeller to invest with them. Even if you have an adequate sum, you may be concerned about starting a new product and simply want to test the water. Look for the policy minimums when investing smaller amounts.

See if you can add more funds and what the minimum addition must be. Once you find how easy the annuity is to manage for both organization and tax benefits, you'll probably want to add more. Consider this aspect when going into a fixed annuity. You also may find that the older you get, the less complicated it is to have only one or two products.

Check the surrender charges. Almost every annuity has some form of a surrender charge. While some may be for a very short period and similar to a shorter term CD, they still have one. Sometimes, you'll find representatives offering a great deal in an annuity, only to find that it locks you in for a lifetime unless you annuitize, take payments.

See how your heirs have to take the proceeds. There are a few annuities on the market, which only allow heirs to annuitize or they face a stiff surrender charge. These are not the best annuities unless that fits your wishes. Some parents are delighted to know that their children won't be able to spend the funds all at one time.

See if you have a right of withdrawal before the surrender period. Almost all annuities allow you to take the interest, but some allow as much as a 10 percent annual withdrawal from the product without a charge. Some of the annuities offer cumulative withdrawals. This means that if you don't use it, you don't lose it. Instead, if you don't take the 10 percent withdrawal the first year, you have 20 percent the second year.

Shopping for an annuity is the same as any other major purchase. It requires that you shop carefully and look for features that are important for you. Even though you may talk to an insurance agent and look at the products he offers, check around for other products to see if his are the best for your situation.