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Your Annuity Options

Investment Categories - Fixed or Variable

When you decide upon a Deferred or an Immediate Annuity, you decide when you will begin receiving the return on your investment. You can further choose how that money will be invested in order to create the return. There are two general categories of how the money is invested.

Fixed annuities

This type of annuity will earn a guaranteed rate of interest for a specific time period, such as one, three or five years. Once the guarantee period is over, a new interest rate is set for the next period. This guarantee of both interest and principal makes fixed annuities somewhat similar to Certificates of Deposit (CDs) purchased from a bank. Unlike a typical CD, however, an annuity is not backed by the Federal Deposit Insurance Corporation (FDIC); its security is directly related to the financial health of the company that sells the annuity. That is why you should always check the financial security of the company. Please go to our company financial rating page for an explanation of the ratings system from some of the major financial rating companies.

You can purchase a fixed annuity by making a one lump-sum payment to purchase a single premium annuity, or by making ongoing contributions to a flexible payment annuity. This option allows you to make smaller payments over a longer amount of time.

Variable annuities

This type of annuity will typically offer a range of investment or funding options. These funding options may include stocks, bonds and money markets. Variable annuities are uncertain compared to fixed annuities. Your principal and the return you earn are not guaranteed, they depend on the performance of the underlying funding options. If the funding options you choose for your annuity perform well, they may exceed the inflation rate or fixed annuity returns. If they don't, you may lose not only prior earnings, but even some of your principal.

Some variable annuities offer a fixed account option that guarantees both principal and interest, much like a fixed annuity. That gives you the option of dividing your money between the low-risk fixed option and higher risk vehicles such as stocks, all under the umbrella of just one annuity. Variable annuities are usually sold on a flexible payment basis, as opposed to a one time lump-sum investment.


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