Q: What are the pros and cons of fixed annuities?
A: Generally, fixed annuities are good investments for someone who has a very low risk tolerance and wants “safe money”. They allow owners to lock in to a guaranteed rate of return and give you peace of mind knowing that you can depend on those payments. Unfortunately, because you are locking into a guaranteed rate of return, you sacrifice a higher return that other investments, like stocks and bonds, may provide over time. That guaranteed rate of return may also expose you to a significant amount of inflation risk, because your payments would stay the same regardless of the level of inflation.