Fixed annuities are designed to help you accumulate funds for your retirement. The money in your annuity earns a guaranteed fixed rate of interest and accumulates on a tax-deferred basis. This means that you do not pay taxes on your earnings until you actually withdraw them from your policy.
How do they work?
Insurers offer fixed annuities in return for a lump-sum payment, or it can be paid for periodically. The money that goes into the annuity earns a fixed rate of return throughout what is known as the accumulation phase, which is when money is invested in.
The annuitization phase is when the money is being paid out. During this phase, the balance that was invested continues to grow at the fixed rate.