A fixed annuity is an insurance contract designed to provide predictable, tax-deferred growth for a specified period of time.

You deposit money with an insurance company, and the insurer credits a stated interest rate according to the terms of the contract. Unlike market-based investments, the value of a fixed annuity does not fluctuate with daily stock market movements.

A fixed annuity typically provides a guaranteed interest rate for a defined period. Some contracts guarantee one rate for the entire term, while others may offer an initial guaranteed period followed by renewal rates.

Interest grows tax deferred, meaning you generally do not pay income taxes on the growth until money is withdrawn.

At the end of the contract period, you may have several options depending on the annuity, including:

• Taking a withdrawal
• Renewing or continuing the contract
• Moving the funds to another qualified annuity through a tax-free exchange when appropriate
• Converting some or all of the value into an income stream

A fixed annuity may appeal to someone who wants:

• Predictable interest
• Protection from direct stock market losses
• Tax-deferred growth
• A defined contract period
• A conservative place for money they do not need immediately
• Future income options

Fixed annuities are often compared with CDs because both may provide predictable interest, but they are very different products. Annuities are insurance contracts and may include surrender periods, withdrawal limitations, and tax rules that do not apply to bank CDs.

Fixed annuities are generally intended for longer-term money. Withdrawals beyond amounts permitted by the contract may result in surrender charges, and withdrawals before age 59½ may be subject to additional federal tax penalties.

Guarantees depend on the financial strength and claims-paying ability of the issuing insurance company.

Education first. No pressure. Just options.