What Is An Annuity?

Why fixed annuities can be a safe place to grow your money

Understanding Fixed Annuities: A Safe and Reliable Investment Option

Planning for retirement involves making critical financial decisions to ensure a stable and secure future. Fixed annuities are a popular investment option for those seeking a reliable source of income in retirement. With their guaranteed returns and minimal risk, fixed annuities can be an essential part of a diversified retirement portfolio. In this blog post, we'll explore what fixed annuities are, how they work, and their benefits and drawbacks.

What is a Fixed Annuity?

A fixed annuity is a financial product offered by insurance companies that provides a guaranteed rate of return on your investment over a specified period. It is a contract between you and the insurer, where you make a lump sum payment or series of payments, and in return, the insurer promises to pay you a fixed amount of income, either immediately or at a future date.

How Fixed Annuities Work

Fixed annuities can be divided into two main phases:

1. Accumulation Phase

During the accumulation phase, you make contributions to the annuity. These contributions grow at a guaranteed fixed interest rate set by the insurer. The interest rate is typically determined when the contract is purchased and may be fixed for a set term or the duration of the contract.

2. Distribution Phase

Once the accumulation phase ends, the distribution phase begins. You start receiving regular income payments from the insurer. These payments can be structured in various ways, such as a fixed period (e.g., 10 or 20 years) or for the remainder of your life.

Types of Fixed Annuities

There are several types of fixed annuities to choose from, each with unique features:

Traditional Fixed Annuity: Offers a fixed interest rate for a specified period, typically ranging from one to ten years. At the end of the term, you can choose to renew the contract, convert it into an income stream, or withdraw the funds.

Deferred Income Annuity (DIA): Allows you to invest a lump sum or make periodic payments during the accumulation phase, with income payments beginning at a future date, such as retirement.

Immediate Annuity: Requires a lump sum investment, and income payments begin almost immediately, typically within one year of purchase.

Multi-Year Guaranteed Annuity (MYGA): Offers a fixed interest rate for a multi-year period, often with higher rates for longer terms.

Benefits of Fixed Annuities

1. Guaranteed Income

Fixed annuities provide a reliable and predictable income stream, which can be especially valuable in retirement. The fixed payments help you budget and plan for your future financial needs.

2. Safety and Security

With fixed annuities, your principal is protected from market volatility. The guaranteed interest rate ensures that your investment grows steadily over time, regardless of market fluctuations.

3. Tax-Deferred Growth

The growth within a fixed annuity is tax-deferred, meaning you won't pay taxes on the interest until you begin receiving income payments. This allows your investment to compound over time, potentially increasing your retirement savings.

4. Inflation Protection

Some fixed annuities offer options to include cost-of-living adjustments, providing protection against inflation and helping maintain your purchasing power over time.

5. Estate Planning Benefits

Fixed annuities can be structured to include beneficiaries, allowing you to pass on any remaining funds to your heirs in the event of your death.

Drawbacks of Fixed Annuities

1. Limited Liquidity

Fixed annuities typically have surrender charges if you withdraw funds before the end of the contract term. This lack of liquidity can be a drawback if you need access to your funds for emergencies.

2. Inflation Risk

While some fixed annuities offer inflation protection, those without it may not keep pace with inflation, potentially reducing the purchasing power of your income over time.

3. Fees and Charges

Fixed annuities may have various fees, such as administrative charges and surrender fees, which can impact your overall returns. It's essential to understand the fee structure before investing.

4. Lower Returns

Compared to other investment options, such as stocks or variable annuities, fixed annuities typically offer lower returns. They are best suited for risk-averse individuals seeking stability rather than high growth potential.

Conclusion

Fixed annuities offer a safe and reliable way to secure a steady income stream in retirement, providing peace of mind and financial stability. With their guaranteed returns and protection from market volatility, they can be a valuable addition to a diversified retirement portfolio. However, it's essential to carefully consider the terms, fees, and potential drawbacks before investing. Consulting with a financial advisor can help you determine if fixed annuities align with your retirement goals and overall financial plan. By making informed decisions, you can confidently plan for a secure and comfortable retirement.

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What is Gap Insurance?

By Justin Sonon • September 10, 2025

Gap Insurance: Dealer Add-On vs. Auto Insurance Policy — Which Is the Smarter Choice? Buying a new car is exciting, but it also comes with financial risks. The moment you drive off the lot, your vehicle starts to depreciate in value. If your car is ever totaled or stolen, your standard auto insurance typically pays out the actual cash value, not the balance left on your loan or lease. That’s where Gap Insurance comes in. Short for Guaranteed Asset Protection, it covers the “gap” between what your vehicle is worth and what you still owe your lender. Why You’ll Hear About Gap Insurance at the Dealership When you’re finalizing your purchase, the finance manager often offers Gap Insurance as an add-on. Convenience : You can roll it right into your financing paperwork. Cost : This convenience comes at a price. Dealers typically charge $400– $900 as a one-time fee, and because it’s financed, you’ll also pay interest on it. Commitment : Once it’s bundled into your loan, you’re locked into that cost even if your balance drops faster than expected. For example: if you buy a $30,000 SUV and total it a year later when it’s worth only $24,000, but you still owe $28,000, the dealer’s Gap Insurance would cover the $4,000 difference. Useful—but not always cost-effective. Gap Insurance Through Your Auto Insurance Policy What many car buyers don’t realize is that they can add Gap Insurance directly to their auto insurance policy. Lower Cost : Most carriers charge just $20–$40 per year for the same protection. Flexibility : You can add or remove the coverage as your loan balance changes. Same Protection : It covers the same difference between your loan and your vehicle’s actual cash value. In the SUV example above, adding Gap Insurance through your policy would provide the same $4,000 protection—but at a fraction of the cost. Which Option Is Best? If you like convenience and don’t mind paying more, the dealership option works. If you want long-term savings, adding Gap Insurance to your auto policy is almost always the smarter financial choice. At Sonon Insurance , you can explore whether adding Gap Insurance to your auto policy makes more sense for your wallet. Because protecting your vehicle, and your finances, shouldn’t cost more than it has to.

What Is Cancel For Any Reason Travel Insurance Coverage?

By Justin Sonon • August 26, 2025

Why “Cancel for Any Reason” Travel Insurance Might Be the Best Thing Since Rolling Suitcases Picture this: you’ve been dreaming about your big trip. Tickets booked, bags packed, playlist ready. Then life happens, your cat decides to swallow a Lego, your boss suddenly “remembers” a big project, or you realize that a trip to a tropical island during monsoon season wasn’t your brightest idea. Normally, this is when you’d be stuck with the sad sound of money swirling down the drain. But if you’ve got travel insurance with Cancel for Any Reason (CFAR) coverage , you can laugh in the face of chaos (well, at least chuckle a little). The Perks of CFAR Coverage—With a Side of Humor 1. You Don’t Need a Good Excuse Traditional insurance : “Sorry, that doesn’t count unless your appendix explodes mid-flight.” CFAR coverage: “You woke up and decided you’d rather binge-watch Netflix in sweatpants than fly across the ocean? Cool—we’ve got you covered.” 2. You’re Protected From Family Shenanigans Maybe your cousin suddenly schedules their wedding the same week as your dream cruise. With CFAR, you can cancel the trip and still show up awkwardly holding the world’s most boring salad bowl from their registry. 3. Weather Can’t Ruin Your Parade Who among us hasn’t booked a beach vacation only to arrive during torrential rain? With CFAR, you can check the forecast a few days before and bail, saving yourself from 7 days of Monopoly in a damp hotel room. 4. Peace of Mind for the Overthinker For those who like to plan Plan A, B, and C… and a backup Plan D (just in case aliens land), CFAR is like a security blanket. You don’t have to justify your panic. Cancel. Reschedule. Repeat. 5. Because Sometimes, You Just Don’t Feel Like It Life’s unpredictable. Maybe you’re not sick, maybe no one died, maybe nothing dramatic happened…you just don’t want to go anymore. CFAR says, “That’s enough reason for us.” The Fine Print (Without the Boring Lecture) Most CFAR plans will reimburse up to 75% of your prepaid, non-refundable trip costs—as long as you cancel within the allowed timeframe (usually 48 hours before departure). But hey, that’s a whole lot better than the 0% refund you’d otherwise get for your spur-of-the-moment decision to stay home with your dog. Final Boarding Call Travel is supposed to be fun. Worrying about “what if I need to cancel?” isn’t. That’s why Sonon Insurance recommends adding CFAR coverage to your travel insurance, so whether it’s a real emergency or just an “I’d rather not,” you won’t lose everything you invested in your adventure. Because at the end of the day, sometimes the best trip… is the one you didn’t take.