Can You Lose Money In An Annuity?

Shawn Plummer

CEO, The Annuity Expert

An annuity can be a great way to save for retirement, but there are some things you should know before buying one. One of the most common questions is, “Can you lose money in an annuity?” The answer may surprise you! This guide will discuss the ins and outs of annuities and what you need to know before investing in one.

Confused About Annuities?

Are you new to annuities and unsure where to begin? Visit our Annuity Learning Lab for expert guidance and insights.

Is It Possible For An Annuity To Lose Money?

Annuity owners can lose money in a variable annuity or index-linked annuities. However, owners can not lose money in an immediate annuity, fixed annuity, fixed index annuity, deferred income annuity, long-term care annuity, or Medicaid annuity.

Is It Possible For An Annuity To Lose Money

Annuity Principal Protection At A Glance

Fixed Index
Principal ProtectionNoYesYesYesYes
Access To PrincipalYesYesYesNoNo
Control Over MoneyYesYesYesNoNo
Tax-Deferred GrowthYesYesYesNoNo
Guaranteed GrowthNoYesYesNoNo
Guaranteed IncomeYesYesYesYesYes
Inflation ProtectionYesYesNoYesYes
Death BenefitYesYesYesYes/NoYes/No
Long-Term Care HelpYesYesYesNoNo

You can lose money in a Variable Annuity.

Variable annuities are investment-based retirement plans. You are investing in stocks, bonds, mutual funds, etc. If the investment performance is unfavorable, you will lose money.

Can You Lose Money In An Annuity

You can lose money in an Index-Linked Annuity (Buffer Annuity).

The new index-linked annuities (not confused with fixed index annuities) offer the opportunity to lose money but with limitations. For example, most contracts have a buffer or floor limiting an individual’s yearly loss.

You can not lose money in Fixed Annuities.

Fixed annuities do not participate in any index or market performance but offer a fixed interest rate similar to a CD.

Fixed Annuity Rates

Shop and compare the latest fixed annuity rates for terms ranging between 2 and 20 years.

Read More

You can not lose money in Fixed Index Annuities.

Another insurance-based annuity allows owners to grow their retirement savings based on the positive movement of a particular stock or bond index while protecting against a stock market crash. Conversely, if the index performance is negative, the annuity’s value will stay at the exact value of the previous year (minus fees).

Lose Money In Annuity

You Might lose money in Income Annuities.

Immediate and Deferred Income Annuities are income annuities that do not participate in any accumulation but rather a conversion of money into a stream of paychecks, either now or in the future. However, suppose an annuity owner selects a life-only payout and dies prematurely. In that case, beneficiaries may lose money because single-life annuities do not offer a death benefit in exchange for a higher income payment.

Helpful tip: Life insurance might be a better option if you want to leave money to your beneficiaries. You don’t have to take a medical examination in some cases. You can compare online life insurance quotes to find affordable coverage. Coverage starts at $9.37 per month.

What Is The Safest Type Of Annuity?

Fixed and fixed index annuities are the safest type of annuity. Here’s why:

  • First, you are protected from stock market losses.
  • Next, you have annual withdrawal provisions to access your money without a penalty.
  • Finally, owners don’t give up control over their retirement savings to the insurance company.

With a fixed annuity, your principal is guaranteed, and you know exactly how much income you’ll receive each month. With a fixed index annuity, your principal is guaranteed, and your interest rate is tied to an index, such as the S&P 500, so you can participate in market gains without the risk of loss.

Both types of annuities offer annual withdrawal provisions that allow you to take out up to 10% of your account value without a surrender fee or penalty. And with a fixed or index annuity, you retain control over your retirement savings. The insurance company can never take away your money or change the terms of your contract.

That’s why fixed, and fixed index annuities are the safest type of annuity.

Losing Money In An Annuity

Next Steps

Annuities are complex financial products, and it is essential to understand their risks before making any decisions. Our experts help you make sense of annuity products and find the best one for your needs. Contact us today for a free quote on an annuity that will fit your retirement plan perfectly.

Can You Lose Money In Annuity

Request A Quote

Get help from a licensed financial professional. This service is free of charge.

Contact Us

Related Reading

Shawn Plummer

CEO, The Annuity Expert

I’m a licensed financial professional focusing on annuities and insurance for more than a decade. My former role was training financial advisors, including for a Fortune Global 500 insurance company. I’ve been featured in Time Magazine, Yahoo! Finance, MSN, SmartAsset, Entrepreneur, Bloomberg, The Simple Dollar, U.S. News and World Report, and Women’s Health Magazine.

The Annuity Expert is an online insurance agency servicing consumers across the United States. My goal is to help you take the guesswork out of retirement planning or find the best insurance coverage at the cheapest rates for you. 

Scroll to Top