Most economists expect an increase in interest rates this year, which would devalue bonds and bond funds. If you are concerned about losses in the bond market, consider putting some of your fixed-income money into fixed annuities instead.
Fixed annuities offer competitive yields, protection against price fluctuations, and deferral of income tax. You can buy a fixed annuity from an insurance company or another financial firm. Purchases may be made with a single premium or with a series of premiums.
In most cases, you’ll receive a certain yield for a set period of time. You might, for example, get 3 percent per year on a three-year contract, 4 percent on a five-year commitment. When the initial term is up, the yield will be re-set.
As long as you make no withdrawals from the annuity, no income tax will be due. Moreover, fixed annuities do not require minimum required distributions so you can maintain the tax deferral as long as you’d like.