Which type of annuity offers a guaranteed minimum return?

Which type of annuity offers a guaranteed minimum return?

• A. Investment annuity
• B. Fixed annuity
• C. Immediate annuity
• D. Deferred annuity

Answer: (B)

A fixed annuity is designed to provide a guaranteed minimum return on the investment. This type of annuity ensures that the policyholder will receive a specified interest rate over a predetermined period, which means that the principal along with interest accrued is protected. This characteristic appeals to conservative investors who prioritize security and predictable income. Additionally, fixed annuities often offer additional benefits, such as tax-deferred growth, allowing the account balance to accumulate without being taxed until withdrawals begin. This is particularly advantageous for individuals planning for retirement, as it can provide a stable income stream in their later years. While other types of annuities, such as immediate and deferred annuities, may have their own benefits, they do not necessarily guarantee a minimum return in the same way that fixed annuities do. Immediate annuities start paying income right away based on the premium paid, while deferred annuities are designed to accumulate value over time but do not explicitly guarantee returns like a fixed annuity does. An investment annuity typically involves more market risk and does not guarantee a return, focusing instead on potential gains tied to market performance.

A fixed annuity is designed to provide a guaranteed minimum return on the investment. This type of annuity ensures that the policyholder will receive a specified interest rate over a predetermined period, which means that the principal along with interest accrued is protected. This characteristic appeals to conservative investors who prioritize security and predictable income.

Additionally, fixed annuities often offer additional benefits, such as tax-deferred growth, allowing the account balance to accumulate without being taxed until withdrawals begin. This is particularly advantageous for individuals planning for retirement, as it can provide a stable income stream in their later years.

While other types of annuities, such as immediate and deferred annuities, may have their own benefits, they do not necessarily guarantee a minimum return in the same way that fixed annuities do. Immediate annuities start paying income right away based on the premium paid, while deferred annuities are designed to accumulate value over time but do not explicitly guarantee returns like a fixed annuity does. An investment annuity typically involves more market risk and does not guarantee a return, focusing instead on potential gains tied to market performance.