A contract between an individual and an insurance company that provides the individual with a fixed income stream for the rest of his life is known as a fixed annuity. There are two types of fixed annuities which are deferred fixed annuities and immediate fixed annuities. Using annuity rates calculator will help the individual determine how much money he is likely to receive on a monthly basis. However, he will first need to know the pros and cons of both types of fixed annuities in order to make an informed decision.

Deferred fixed annuities consist of two phases which are the accumulation phase and the distribution phase. During the accumulation phase, the individual makes regular deposits to his account. These deposits can either be pre-taxed or post taxed. The accumulation phase can last for a few years or for a few decades. The individual determines the duration of the accumulation phase but once he decides to have the distributions started, he will start receiving payouts on a monthly, quarterly, or annually basis. The individual determines when he wants to receive the payouts; however, once he has made his decision, he cannot change it.

Immediate fixed annuities are funded with a single post-taxed amount. The distributions normally start within a year. The amount used to purchase the fixed annuity can either be from a checking or savings account.

Stock market fluctuations and other economic factors do not affect the return paid on fixed annuities. This amount remains fixed for the year that is has been set for. This is an advantage for retirees with a tight budget. They are guaranteed a fixed amount to cover their costs of living. Based on the fact that inflation has a direct impact on the purchasing power of the payouts, fixed annuities offer what is known as a COLA or cost of living adjustment which increases the price of the fixed annuity as well as the payout amount thus counteracting inflationary pressures.

Premature death of the annuity owner is a risk factor of fixed annuity. In some cases, the annuity owner dies before he is repaid the entire annuity amount. In such cases, the remaining balance will be paid as a lump sum amount to the beneficiary unless the annuity owner chose the option known as period certain which means that the beneficiary will receive payout for the remaining annuity contract duration instead of receiving a lump sum amount.