Fixed Annuities
With a fixed interest rate, you’ll know how much guaranteed growth you can count on, no matter how the market performs.
A fixed annuity is a financial product that offers a fixed interest rate on your investment and may provide you with a stream of retirement income that’s guaranteed for the rest of your life, or for a set number of years.
Depending on when you choose to start your payments, fixed annuities are classified as:
Immediate
Your retirement income payments will begin within a year after you purchase the annuity.
Deferred
Your retirement income payments will begin in the future, usually when you retire.
Depending on when you choose to start your payments, fixed annuities are classified as:
Immediate
Your retirement income payments will begin within a year after you purchase the annuity.
Deferred
Your retirement income payments will begin in the future, usually when you retire.
Explore Multi-Year Guarantee Annuities
A Multi-Year Guarantee Annuity (MYGA) lets your money grow at a fixed interest rate for a pre-determined number of years. Learn more on whether a MYGA could help provide balance to your portfolio.
Fixed annuity features
Guaranteed retirement income
A fixed annuity can guarantee that you receive ongoing income payments starting in retirement and continuing for a specific period time or the rest of your life.
Fixed rate of return
A fixed annuity's value increases over time, based on a fixed interest rate. It is not affected by fluctuations in the market. A fixed annuity will have a guaranteed minimum interest rate as well as a current rate that may be higher.
Tax-deferred growth
Fixed annuity earnings are tax-deferred until you take money out of the product.
Standard death benefit
Most fixed annuities also offer a standard death benefit that is paid to your beneficiaries if you pass away before annuity payouts have begun. If annuity payments have begun, any death benefit will depend on the payout option selected.
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Fixed annuity FAQs
Fixed annuities offer a guaranteed, predictable stream of retirement income and tax-deferred growth at a fixed rate.
How do fixed annuities work?
A fixed annuity is an insurance contract that can turn your retirement savings into a guaranteed income stream. You may fund a fixed annuity with a lump-sum contribution or a series of payments over time. Those contributions earn a guaranteed rate of return during the accumulation phase. You may choose to take withdrawals or set up a guaranteed income stream when you retire, or at a later date you specify.
What are the pros and cons of fixed annuities?
Fixed annuities may offer several advantages, including a guaranteed income stream in retirement, tax-deferred growth at a guaranteed interest rate. But there are some tradeoffs. With no market exposure, your annuity will not benefit when the market performs well. It also may not keep up with inflation. And you may pay surrender charges if you need to tap into your contract or cancel it before the surrender period ends.
What are the risks of a fixed annuity?
Because fixed annuities are not tied to market performance, you won’t lose value when the market performs poorly. And while this ensures safety for the principal you accumulate, there are some drawbacks. Your annuity’s fixed rate of return may not keep up with inflation, and it won’t increase if the market performs well. Similar to other types of annuities, fixed annuities may have limited liquidity—meaning you can’t easily access all your money without paying a surrender charge during the surrender period.
How does a fixed indexed annuity differ from a fixed rate annuity?
Fixed rate and fixed indexed annuities are both contracts that guarantee no loss of principal due to market performance. The main difference is how interest is calculated. With a fixed rate annuity, your contributions grow tax-deferred at a guaranteed rate of return. But with a fixed indexed annuity, any interest is tied to the performance of a specific market index, such as the S&P 500. Returns are typically subject to a specified cap. Also, if the market index suffers losses, no interest will be applied that contract year.
What’s the difference between a fixed annuity and a variable annuity?
The key difference between fixed and variable annuities is that fixed annuities accumulate interest at a specified rate, while performance fluctuates due to the underlying investments of a variable annuity. With a fixed annuity, your premiums grow at a guaranteed rate of return. So your annuity’s value will be more predictable at the time you annuitize and begin receiving guaranteed payments. This differs from a variable annuity, where your premiums are invested in subaccounts like stocks, bonds and money markets during the accumulation phrase. Higher returns will make for higher payouts once you annuitize, while losses typically result in smaller payouts.
How do fixed annuities compare to certificates of deposit (CDs)?
Fixed annuities are issued by insurance companies, while certificates of deposit (CDs) are bank products that are FDIC-insured. A fixed annuity has a guaranteed minimum interest rate for as long as the owner holds the contract. It may also have a current interest rate that can be higher than the guaranteed minimum. A fixed annuity also provides the option of various guaranteed income streams for retirement. By contrast, a CD has a specified rate for a certain amount of time. The bank issues a tax form for the taxable interest each year. For a fixed annuity, no taxes are owed until money is actually withdrawn. While you do pay a penalty if you withdraw from a CD before your agreed-upon term ends, those penalties typically only reduce your interest—whereas surrender charges on a fixed annuity apply to the entire annuity value.
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An investment cannot be made directly in an unmanaged index.
Investing in securities involves risks such as fluctuating principal, and they may lose value. CDs offer a fixed rate of return. The value of a CD is guaranteed up to $250,000 per depositor, per insured institution, by the Federal Deposit Insurance Corp. (FDIC), an independent agency of the United States government.
Holding an annuity inside a tax-qualified plan does not provide any additional tax benefits.
Withdrawals and surrenders will decrease the value of your annuity and, subsequently, the income you receive. Any withdrawals in excess of 10% may be subject to a surrender charge. The taxable portion of each annuity distribution is subject to income taxation. If a taxpayer is younger than 59½ at the time of distribution, a 10% federal tax penalty will apply to the taxable portion of the distribution unless a penalty-tax exception applies.
Guarantees based on the financial strength and claims-paying ability of Thrivent.
Thrivent and its financial advisors and professionals do not provide legal, accounting or tax advice. Consult your attorney or tax professional.
Investing in securities involves risks such as fluctuating principal, and they may lose value. CDs offer a fixed rate of return. The value of a CD is guaranteed up to $250,000 per depositor, per insured institution, by the Federal Deposit Insurance Corp. (FDIC), an independent agency of the United States government.
Holding an annuity inside a tax-qualified plan does not provide any additional tax benefits.
Withdrawals and surrenders will decrease the value of your annuity and, subsequently, the income you receive. Any withdrawals in excess of 10% may be subject to a surrender charge. The taxable portion of each annuity distribution is subject to income taxation. If a taxpayer is younger than 59½ at the time of distribution, a 10% federal tax penalty will apply to the taxable portion of the distribution unless a penalty-tax exception applies.
Guarantees based on the financial strength and claims-paying ability of Thrivent.
Thrivent and its financial advisors and professionals do not provide legal, accounting or tax advice. Consult your attorney or tax professional.
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