Why are Fixed-Dollar Annuities So Popular?
The fixed dollar annuity is considered to be the least risky type of TSA. It works very much like a savings account at a bank, in that you earn interest on your premium. You dont have to worry about the stock market or about bond prices since the investment risk is assumed by the insurance company. If you choose a fixed dollar annuity, the interest rate you will receive on your money will fluctuate over time, in line with the insurance companys investment earnings. The premiums paid do not fluctuate up and down, but the interest rate varies according to the yield earned by the insurance company on its investments. However, the interest rate credited can never be less than the guaranteed rate (usually 3%). It helps to understand how the insurance company determines interest rates on fixed annuities. The company receives your contributions, which are called premiums. The premiums are invested, usually in bonds and mortgages, and the company earns a return on the investments. The company
