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Simple English definitions for legal terms
fixed annuity
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A quick definition of fixed annuity:
A fixed annuity is a type of investment where you give money to an insurance company and they promise to pay you a certain amount of money every so often. It doesn't matter if their investments do well or not, you will still get the same amount of money. This is different from other types of annuities where the amount of money you get depends on how well the investments do. Fixed annuities are safe because the insurance company controls the investments to make sure they are stable.
A more thorough explanation:
A fixed annuity is a type of investment where an individual pays a lump sum of money to an insurance company, and in return, the insurance company promises to pay a specific amount of money to the individual at regular intervals, usually monthly, for a set period of time. The amount of money paid out is predetermined and does not depend on the performance of the investments made by the insurance company.
For example, let's say John invests $100,000 in a fixed annuity with an insurance company. The insurance company promises to pay John $500 per month for the next 20 years. This means that John will receive a total of $120,000 over the 20-year period, regardless of how well the insurance company's investments perform.
Fixed annuities are considered a safe investment because the insurance company guarantees a specific payout, regardless of market conditions. However, the downside is that the payout is typically lower than what could be earned through other types of investments, such as stocks or mutual funds.