What Are Annuities? (Fixed Guaranteed)

Couple planning for passive income

In life, we may experience seasons where providing an annual income is not always possible. We may confront sudden illnesses or even a downturn in the job market. Especially during retirement, individuals’ annual income often drops significantly because they are no longer working. Finding a way to protect you and your family against life’s uncertainties is paramount in financial planning.

Typical forms of financial planning have a high market risk and are rarely able to supplement up to your previous income stream. A Guaranteed Fixed Annuity helps mitigate this risk by establishing an account that guarantees a fixed income stream. In this article, we are going to answer some of the most common questions about fixed annuities. 

  • What are Annuities? 
  • How Do Annuities Work?
  • How Does an Annuity Work for Different Ages? 
  • What Are the Costs and Benefits of a Fixed Annuity?
  • Who Is a Fixed Annuity For?

What Are Annuities?

An annuity is a form of insurance that provides a person with an income for a lifetime, a specific period, or a combination of the two. A Guaranteed Fixed Annuity, or Fixed Guaranteed Annuity, provides a guaranteed income stream without any market risk. Other kinds, such as the Indexed and Variable annuities, carry market risk. Because of this, McFie Insuranceonly sells Fixed Guaranteed Annuities. 

How Do Annuities Work?

A fixed annuity consists of two phases: the accumulation phase and the annuitization phase (also known as the annuity phase). During the accumulation phase, the account holder pays a lump sum or recurring premiums to fund the fixed annuity, and it earns interest. During the annuitization phase, the annuitant receives payments from the annuity. Fixed annuities have a guaranteed principal and interest rate backed by the insurance provider.  

Individuals can outline specifics for the payout phase when setting up the account. Account holders can choose between income payments that are immediate or deferred. If you choose an immediate payout, you could start receiving payments in as little as one year. However, people will often choose a deferred payment schedule that will begin payouts at retirement. 

How Does an Annuity Work for Different Ages?

Annuity payments are based on your life expectancy. This means that the younger you start receiving payments, the smaller your payments will be. It’s not unusual to see 4-6%+ annual payout rates from a Guaranteed Fixed Annuity depending on age, and health factors.

In many cases, a fixed annuity can be passed on to beneficiaries at time of death. This ensures that your wealth continues to add value to your family even after death. 

What Are the Benefits of a Fixed Annuity? What Is the Cost?


  • Locks in guaranteed growth
  • Provides a guaranteed income
  • No market risk
  • Customizable to meet specific needs
  • Can be purchased up to age 90
  • No contribution limits 


Annuities can be started with a lump sum or through a series of payments which accumulate value while income from the annuity is deferred.

Who Is a Fixed Annuity for?

Now that we better understand the answer to  “How do annuities work,” you can start evaluating whether or not a fixed annuity would be beneficial for your financial future. 

In general, annuities are for people who need to convert a lump sum of assets into a series of guaranteed payments or need a steady, guaranteed income for a period of years. They are often used by people in retirement to provide a guaranteed income stream for their lifetime.

If you are interested in seeing how a Guaranteed Fixed Annuity could fit into your financial plans,  schedule an appointment with us to look at a Custom Annuity Illustration.