Fixed Annuities provide all of the following except which?

• A. Guaranteed minimum interest
• B. Principal protection
• C. Hedge against inflation
• D. Tax-deferred growth

Answer: (C)

Fixed annuities are designed to give safety and predictable growth. The insurer guarantees a minimum interest rate, so you have a floor on earnings even if market rates fall. The principal is protected, meaning the money you put in won’t be lost due to market swings. Earnings grow on a tax-deferred basis, so you don’t pay taxes on the gains until you withdraw. Because the credited rate in a fixed annuity is generally fixed and does not move with inflation, it doesn’t serve as an inflation hedge. Inflation erodes purchasing power, and a fixed rate may not keep up, so fixed annuities aren’t counted on to protect you against rising prices. If inflation protection is desired, you’d look to products that explicitly offer inflation riders or alternative design features, but those aren’t inherent in a standard fixed annuity.