Today there are a many annuity products available. Fixed annuity is one of these popular products. There are two primary forms of fixed annuities; those that don’t payout right away and those that have an immediate payout. Immediate annuities usually payout income upon inception, and deferred annuities defer payment until a later date.

Fixed annuities are usually compared to certificates of deposit (CDs) by those investors looking for safety. Just like many other financial products you must evaluate the pros and cons in deciding which might be more appropriate for your financial needs.

Generally CDs and fixed annuities both base their rates on current market conditions and time of maturity. Typically, the longer you wait to maturity, the higher the yield you can receive. Traditionally, fixed annuity rates are higher than CD rates due to longer maturities and rate conditions. Fixed rate annuities may have the edge in longer-term returns, but they are not short-term. Usually deferred fixed annuity stretches in periods from 3 years to 10 years.

It’s important that you understand the liquidity issues as they may relate to your CD or fixed annuity investing. CDs may provide for a shorter time horizon, but that doesn’t mean they’re liquid. When purchasing a CD you’re obligated to that CD’s time period, most commonly a year. If you take out any amount of your principle prematurely, you will have to pay interest penalties.

Earnings inside your annuity are not taxable unless they are withdrawn. As time passes tax deferred growth exceeds taxable investments since earnings compound without current income taxation, year after year. It’s essential to understand that annuities are taxed as regular income, so withdrawals are best taken when income taxes are lower.

Fixed annuities are guaranteed by the full faith and credit of the issuing insurance company, and they are not contained or supported by the government. The higher rated insurance companies have to meet stringent capital requirements to back up annuity and life insurance obligations. You should choose the higher rated company while comparing fixed annuity rates. If you go with a lower rated annuity company for an insignificant increase in rate just isn’t worth the extra risk.

Thanks to the Internet you can get a number of competitive fixed annuity quotes with a click of the mouse. This is a great way to find the best fixed annuity rate, but you must proceed with extreme caution. Working with a trusted independent agent is recommended here, as they can give you the proper guidance you need, along with the top fixed annuity rate you’re looking for.

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