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Forbes You can just as easily stagger the maturities at 3 month or 3 year intervals or have an investment horizon of 3 years or 10 years. Ladder with Bonds ...
"Laddering can be done with any fixed income product of a predetermined maturity, including bonds, CDs or fixed annuities"
Fixed annuities have a period of time when their interest rate is fixed, but they don't "mature" after that. They simply convert to paying a floating rate (still called "fixed annuities").
In this sense, they're like 5/1 adjustable rate mortgages - fixed rate for a period of time (here, five years), then a floating rate until the mortgage matures decades down the road.
You might want to lock in a new fixed rate with a new fixed annuity, but you're not forced to because the old annuity doesn't "mature".
Note that these days, many fixed annuities tack on market value adjustments (MVA) if you redeem before some "maturity" date, even if there is no "early withdrawal penalty" (to use CD terminology).
What that means is that the issuer is going to treat it like a bond - if interest rates go up while you hold the annuity, then its redemption value (or sale price of the equivalent bond) goes down, and you get less money. If interest rates go down (yeah, sure) while you hold the annuity, then you'll get more than face value for the annuity. Like a bond, you'll get face value at "maturity" or later if you continue to hold the annuity. http://www.annuityadvisors.com/reference/detail/market-value-adjustment-mva?refid=12
Comments
Fixed annuities have a period of time when their interest rate is fixed, but they don't "mature" after that. They simply convert to paying a floating rate (still called "fixed annuities").
In this sense, they're like 5/1 adjustable rate mortgages - fixed rate for a period of time (here, five years), then a floating rate until the mortgage matures decades down the road.
You might want to lock in a new fixed rate with a new fixed annuity, but you're not forced to because the old annuity doesn't "mature".
Note that these days, many fixed annuities tack on market value adjustments (MVA) if you redeem before some "maturity" date, even if there is no "early withdrawal penalty" (to use CD terminology).
What that means is that the issuer is going to treat it like a bond - if interest rates go up while you hold the annuity, then its redemption value (or sale price of the equivalent bond) goes down, and you get less money. If interest rates go down (yeah, sure) while you hold the annuity, then you'll get more than face value for the annuity. Like a bond, you'll get face value at "maturity" or later if you continue to hold the annuity.
http://www.annuityadvisors.com/reference/detail/market-value-adjustment-mva?refid=12