Fixed Annuity Company - The Concept

The elders of the Presbyterian Church first brought the concept of a fixed annuity company to light in the mid seventeenth century. The idea was to provide a yearly pension for widows and the elderly members of the clergy. The concept of the fixed annuity company hasn't changed much in the present day. Perhaps the only difference is the tax deferment that is characteristic of most modern annuities.

The idea behind an annuity is that they allow you to invest in a tax-free fund for a number of years until you are ready to withdraw money. Once you withdraw from the fund you would be taxed on it as you would regular income. In the financial world the process of providing you with a check that you cash every year from your saved taxed deferred funds is called annuitization.

Every fixed annuity company today will also offer you the guaranteed income for life option. You can also opt to be paid the annuity for a certain specified period of years which of course if very handy if you ever suffer an illness or disability.

There is not really such a thing as a fixed annuity company. If you went through the Yellow Pages you probably would not find such an entity. Most of the time it is an insurance company offering you the fixed annuity. Annuities are also sold through licensed insurance brokers and agents. Using a broker to find an annuity deal is a good idea as it allows you to compare various interest rates offered by different insurance companies.

The reason that it is a good idea to invest in products offered by a fixed annuity company is that if it ever goes out of business that the other insurance companies in the state where the defunct insurance company is are obligated by law to honor the conditions of your annuity.

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