Frequently Asked Questions
How do fixed-rate annuities work?
A fixed-rate annuities are a type of guaranteed income product that provides a steady stream of income for the remainder of an individual's life. Once an initial investment is made into the annuity, the individual is guaranteed a fixed level of income for the term of the annuity. This means there is no risk of the cash flow decreasing over time. However, it's important to note that inflation can gradually deplete the value of the income stream. The way fixed-rate annuities work is that the insurance company takes a risk when offering a Guaranteed Investment Contract (GIC), with the goal of earning more on the investment versus the rate that has been guaranteed on the GIC. The funds from the GIC are combined with the funds of other general account GIC customers in a general account. This account typically offers a better return than savings accounts due to not requiring collateral or relying on an issuer's creditworthiness, making it a relatively safe investment.
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