The fixed income annuity is unique in that it is an insurance contract in which the insurance company pays you back for your premium payments. Rather than other insurance products that stipulate the terms of the payout based upon chance or incidence, the annuity products establish a set date when income distributions are to commence.

The fixed portion of this annuity term refers to the fixed income that is distributed to the annuity’s beneficiaries. These payments can be setup to continue for a set period of time or can even be designed to continue payments for the lifetime of the account owner. This lifetime option has become rather popular with retirement planners, and allows a guaranteed income stream that the retiree is unable to outlive.

Another appealing option that makes this a good choice for a portion of an individual’s retirement plan is the income payments may be delayed until the investor is ready to start receiving them. This type of contract is referred to as a deferred fixed annuity contract. As opposed to an immediate annuity, the payments back to the beneficiary do not begin until after at least one time period from the creation of the account.

The most common deferral is until the annuity owner reaches sufficient retirement age to start receiving income payments. These distributions can be used as ordinary income, or can just as easily be applied to some sort of funding requirement for another financial product. The creativity of the financial planner is really the true determinant as to how the contract can be used to meet the individual’s unique retirement needs.