Chelsey Tucker graduated with a Bachelor of History degree from Metropolitan State University in 2019. She now writes about insurance with her specialty being life insurance and has been quoted on Help Smart Phone and MEL Magazine.

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Dan Walker graduated with a BS in Administrative Management in 2005 and has been working in his family’s insurance agency, FCI Agency, for 15 years. He is licensed as an agent to write property and casualty insurance, including home, auto, umbrella, and dwelling fire insurance. He’s also been featured on sites like

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Reviewed by Daniel Walker
Licensed Auto Insurance Agent

UPDATED: Mar 19, 2020

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Are annuities guaranteed investments?Yes, annuities are considered guaranteed investments. This is a contract that guarantees you regular income upon the effective distribution date. It is a contract often used when the insured reaches the age of retirement.

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During the accumulation phase of an annuity, you can deposit a lump sum of money, or make monthly payments over many years.

Then, usually when you retire, the company pays you’re your money during the distribution phase. Ideally, this is a guaranteed investment—at least to the extent that an insured gets back that money.

Fixed Annuity Plan and Variable Plans

However, annuities are complicated by the fact that you can buy contracts with fixed or variable payment schedules.

  • Variable annuities have fees associated with them. More to the point, there is variable interest, meaning that there is no fixed number associated with your payment schedule.
  • Fixed and indexed annuities do not have fees for holding the contract.

Annuity contracts offer payments that can last for a person’s entire lifetime—and payments that may be passed to a beneficiary. Most often, the funds revert to the insurance company upon death. Some contracts will even live on beyond the amount of money associated with the insured’s account. Selected annuity contracts are the only form of investment that can guarantee income.

The does not mean, however, that all annuities can be absolutely “guaranteed” by laymen’s terms. It depends on the type of annuity contract that was signed. There are deferred annuities and immediate annuities.

  • Immediate contracts start right away upon purchase, while deferred annuities are held back until a specific date (such as the age of retirement). With a fixed annuity contract, you are all but guaranteed your income back, since you are investing in low-risk securities.
  • On the contrary, variable return contracts change depending on the performance of the funds. For example, if your subaccounts are in stocks, your annuity income will be partly determined by the performance of the stock market. Therefore, you can see that while you are guaranteed payment, you cannot bank on exactly how much money you will receive per month, not with a variable contract.

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Deferred Taxes and Other Advantages

One of the greatest advantages of annuity plan is that they do not change, even to adjust for modern inflation. This is the type of guarantee usually associated with commodity and precious metals, not insurance contracts. However, a fixed annuity plan is guaranteed to receive a certain amount of income, even if that income is deferred—even if it’s an entire lifetime later. The payments you receive are actually a combination of both interest and principle. If you choose deferred payments, you actually increase your investment, because of the growth caused by deferred taxes.

Variable annuities do constitute a greater risk, as far as guaranteed income is concerned. Variable annuities have no predetermined rate of return. The advantage is that this type of contract can lead to higher returns, and it’s also tax-deferred, meaning you are not taxed until you withdraw money from the account (this works similarly to an IRA account).

You can also choose to annuitize, which means that you opt to receive payments for the rest of your life. If you choose this route however, you choose not leave anything for your heirs. Basically, an annuity is not an investment for your heirs, it is for you to live on.

All payments will remain the same, regardless of the contract time. The payments will continue until the insured dies. This is one of the most popular contracts because of its certainty. This explains why companies give careful consideration to the insured’s age, health and probable longevity.

An Under-Looked Significant Risk

Last but not least, consider the loophole of your insurance company going out of business. Everything can be guaranteed in writing unless the party making the guarantee exits the scenario. If your insurance company goes out of business, then guarantees aren’t worth anything to you.

This should emphasize the importance of choosing a company that is reliable, has physical assets, and a respectable business reputation. Use an independent insurance auditor like AM Best or Standard & Poor’s to check out the financial strength of the entity you are considering for your annuity.

Finding a contract that is guaranteed means finding a company that you can have confidence in for the long-term. In many cases, this is confidence will and should last a lifetime. Remember this as you go about looking for a new annuity contract, whether you choose fixed or variable payment schedules.

You can get started searching right now, using the free web chaser tool. Start comparing online annuity rates to get an annuity contract you and your family can live with and bank on now!