What is the difference between variable, fixed, and fixed-indexed annuities? This guide will take a look at these three types of annuities to see what they are all about. We’ll also discuss some advantages and disadvantages each type has so you can make an informed decision.
Fixed vs. Fixed Index vs. Variable Annuity
- Fixed annuities guarantee your money will earn at least a minimum interest rate. Fixed annuities may earn interest at a rate higher than the minimum but only the minimum rate is guaranteed. The insurance company sets the rates.
- Fixed indexed annuities are a type of fixed annuity that earns interest based on changes in a market index, which measures how the market or part of the market performs. The interest rate is guaranteed to never be less than zero, even if the market goes down.
- Variable annuities earn investment returns based on the performance of the investment portfolios, known as “subaccounts,” where you choose to put your money. The return earned in a variable annuity isn’t guaranteed. The value of the subaccounts you choose could go up or down. If they go up, you could make money. But, if the value of these subaccounts goes down, you could lose money. Also, income payments to you could be less than you expected
Variable vs. Fixed Vs. Fixed Indexed
| Variable Annuity | Fixed Index Annuity | Fixed Annuity | |
|---|---|---|---|
| Principal Protection | No | Yes | Yes |
| Access To Principal | Yes | Yes | Yes |
| Control Over Money | Yes | Yes | Yes |
| Tax-Deferred Growth | Yes | Yes | Yes |
| Guaranteed Growth | No | Yes | Yes |
| Guaranteed Income | Yes | Yes | Yes |
| Inflation Protection | Yes | Yes | No |
| Death Benefit | Yes | Yes | Yes |
| Long-Term Care Help | Yes | Yes | Yes |