Fixed Annuity

An investment contract sold by a life insurance company that guarantees regular payments to the purchaser for a specified period of time, or for life through annuitization. The purchaser generally pays a premium either in a lump sum or in installments. during the accumulation phase, a fixed anuity will earn a fixed rate of interest, as stated in the contract. This interest will accumulate on a tax deferred basis, wi th taxes due upon distribution. Distributions prior to age 59 1/2 may be subject to an additional 10% federal tax penalty.