A ladder allows you to reach higher ground; “laddering” fixed annuities works in a similar fashion. Instead of buying one long-term fixed annuity with a large lump sum, you purchase a number of fixed annuities, each with different terms and most likely, different interest rates.

Laddering has been used successfully with a number of other financial products such as bank certificates of deposit or bonds. Mainly used as insulation against interest rate risk, an annuity ladder is a safe way to build up your retirement savings over a period of time, without having all your savings locked up in one annuity for a longer-than-you’d-like time period.

Consider this: you have $500,000 in savings, you want to retire in 10 years, and you are considering using fixed annuities to grow your nest egg safely. When you put all of your $500,000 nest egg in one 10-year fixed annuity paying 5%, you can expect a final return of $814,447. But in return for these great gains, your money is locked up for ten years – and subject to surrender fees in case you need access to that original principal at any time. Surrender fees can eat up a portion of your interest earnings, making the whole point of locking up your money in a 10-year fixed annuity moot.

But what if you took your $500,000 and bought five different fixed annuities for $100,000 each? These five fixed annuities could have five different terms and interest rates. For example, a 10-year paying 5%, a 7-year paying 4.8%, a 5-year paying 4.3% and two 3-year fixed annuities paying 4.2%. By laddering your annuities in this manner, all of your money will not be locked up for ten years. Also, if interest rates rise in three years, when two of your annuities mature, you have access to at least a portion of your money so that you can roll it over into higher-yielding fixed annuities.

Do you want to learn more about laddering fixed annuities? The Annuity Specialists at AnnuityForLife.com are available to walk you through the laddering process. All you need to do is call 1-888-261-6237 to speak with a Specialist today.