The Top Questions People Ask Me About Opening a 3.5% Fixed Annuity Account

There’s a lot of interest in the 3.5% Fixed Annuity offer which expires 12-12-13.

Many people have never purchased an annuity, and even though the 3.5% sounds appealing, they are hesitant and have questions.

Questions cause you to sit on the fence and not do anything. So I wanted to write up the most common questions or concerns that people are asking me. Maybe it might answer a couple of your questions too and help point you in the right direction.

First and foremost, don’t make it more complicated that it needs to be. Opening an annuity account is really easy. It’s no different than going to a different bank to get a higher CD rate.

So I earn 3.5% every year? Yes. It’s a fixed rate of 3.5% per year, every year for 5 years. It compounds daily.

Is it safe?  Yes, very safe. Do you know anyone who has ever lost money in a fixed annuity? I don’t. fixed annuities are legal binding contracts between you and an insurance company. Plus the Illinois Guaranty Association guarantees each annuity up to $250,000 so there are many levels of protection. See coverage limits here

Can I take my IRA Minimum distributions from the annuity if I use IRA money? Yes

Is Fidelity & Guaranty Life Insurance the same as Fidelity Investments? No. You can NOT purchase this annuity through Fidelity Investments. They offer investment products like stocks and mutual funds. Fidelity & Guaranty is a life insurance company. You need to open an account with them if you want a Fixed Annuity. We help you with the application.

My money is at Fidelity Investments. How do I get it to the annuity? You can write a check or you can do a transfer. Either way works. It’s pretty easy.

How do I open an account? There is an application that we will help you with.

Do I pay taxes on the interest? No. It grows tax-deferred so you only pay taxes if you withdraw money.

How do I actually fund the annuity? A couple of ways:

  • You can write a check
  • You can do an account transfer. Such as transferring a portion of your IRA or other accounts. There is a transfer form to fill out, then the company’s back offices handle the moving of the money.
  • You can transfer an old annuity into a new annuity to get a higher rate. This is called a 1035 exchange and there are NO taxes due on the transfer

I think interest rates are going to go up and I don’t want to lock my money up in case they do. My crystal ball broke a long time ago. I don’t really have a good answer for this one. Rates may go up, they may go down, they may stay the same. All I know is 3.5% fixed and guaranteed, with a guarantee on your principal and you can withdraw the interest, is better than anything I have seen in a long time.

What’s the minimum investment? $5,000 is the minimum. The maximum is $600,000

Do I get statements? Yes. The statements come out annually.

Can I restrict how the money gets paid out to my kids in case I die? Yes. Annuity contracts have restricted beneficiary forms. They would allow you to dictate exactly how you want the death benefit paid to your family. It works very similar to a trust in this way. And, it’s free. Just an extra form to fill out.

At the end of 5 years can I take my money and leave? Yes. You can do whatever you want with your whole account value after 5 years. If you keep it in an annuity then it keeps growing tax deferred. If you withdraw all the money, you will have to pay taxes on the interest.

What happens if I die? You name beneficiaries. So the money goes right to them and avoids probate. Your spouse can choose to continue the annuity as is, or take the death benefit if he/she is the primary beneficiary.

Hopefully this was helpful. If you have a question I didn’t answer feel, free to call me at 847-376-8400 or shoot me an email at

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