What is a Fixed Annuity? 

Have you heard of a Fixed Indexed Annuity? Each year millions of people are rolling their 401Ks and IRAs into self-directed IRAs using Fixed Indexed Annuity contracts. In fact, in 2014 fixed annuities sales experienced a 23% increase from the previous year.


Fixed Indexed Annuities are contracts with life insurance companies. Life insurance contracts or fixed annuities allow for a person to deposit money with the company for a contractual amount of time, and most contracts allow for the depositor to take ten percent of the principal amount of money off the contract each year after the first year. There are several different names for these contracts. They can be called equity indexed annuities, hybrid annuities, indexed annuities, and occasionally they are referred to couple other ways. 

Fixed Annuities are very different from variable annuities or variable life insurance. With a fixed contract the contract holder knows exactly how bad it could get. This eliminates surprises. With stock market related vehicles, savers can lose all their money. This is not the case with fixed indexed annuities.

Each year of the contract, the gains made in that year are locked in, and the contract never goes below the locked gains if the contract holder remains within the parameters of the contract. What are the parameters? Some fixed indexed annuities have 5, 10, or 14 year surrender periods (the duration period of the contract).

For example, if a person purchased a 10-year fixed annuity, there may be a declining surrender charge. Each contract varies and this is for example use only… During the first year there may be a 10% penalty if you wanted to take money out of the contract. This is what we mean when we say the contract holder knows the worst it can ever get.

The next detail is huge. No other savings vehicle can give a saver income for life. Fixed Annuity contracts allow contract owners to generate an income stream from their contract that they can never outlive. For this reason, it is paramount that you have your annuity portfolio built from the highest paying contracts. The stock market and banks have no way to generate an income that you will never outlive.

When a person has money in mutual funds or the stock market, there is no way of knowing how bad it can get, except to say they could lose it all. During the Great Depression, people who had their money invested in the stock market lost money, and the bank depositors lost their money when the banks declared a bank holiday. It actually got so bad that the stock market was closed for several months during the Great Depression. Who was open? Life insurance companies were open, and none of their depositors lost a dime.


We believe if you compound your money year after year you will be better off financially than if your money experiences “bull years and bear years.” Putting you in a financial position where you avoid losing money is key. Also generating consistency and stability no matter what, and always putting your interests before ours, are our goals.

Not all annuity contracts are alike. They have bells and whistles. At TreeceCo we have access to the best annuity carriers available, and we would be honored to earn your business. We only work with the best carriers, but one or two companies do not control us. We work for our clients!

Warning: most financial professionals are here today and gone tomorrow. Many financial professionals can sell you an indexed annuity, but few are annuity specialists and even fewer have over 34 years of experience. One of the worst things you can do is to buy an annuity from an insurance generalist who is not an annuity expert. When that happens you may be locked into a contract that has limitations. Make sure your fixed annuity portfolio is assembled by the most creditable expert.


Tony and David Treece

Tony and David Treece