An insurance contract that features an owner, who purchases the contract and typically funds it; an annuitant, named by the owner and whose life expectancy is used to determine the amount of money that will be paid when owner chooses to annuitize the contract; and the beneficiary, who is named by the owner to receive the value of the annuity upon the owner’s death if the contract had not yet been annuitized. A fixed annuity pays a pre-set rate of annual interest for a specified period, after which the interest rate may change. Any interest earned is tax-deferred until withdrawal. Withdrawals are subject to contract penalties and taxes at ordinary income tax rates; withdrawals prior to age 59½ are also subject to a 10% IRS penalty. The owner can also annuitize the contract, converting the account value to a series of monthly payments ranging from a few years to the annuitant’s lifetime (or a combination of the lifetimes of the annuitant and the annuitant’s spouse, called “joint and survivor” payments). Payments cease upon the death of the annuitant(s), unless the owner had selected a guaranteed minimum period of payments, called “term certain.” Once annuitized, changes generally cannot be made.