Annuity Types

The Main Types of Annuities

Not all annuities work the same way. Some products focus on safety and steady income, while others offer more growth potential but with added risk.

The three most common types — fixed, fixed index, and variable annuities — fall along a spectrum of risk tolerance, ranging from safe to risky, depending on your retirement plan.

Fixed Annuities

Fixed annuities are the simplest type of annuity. They guarantee a set interest rate for the contract term, so your payouts remain steady regardless of market swings. This predictability makes them a popular choice for retirees seeking steady income they can count on.

There are two common types of fixed annuities:

• Multi-Year Guaranteed Annuity(MYGA): A MYGA locks in a fixed rate for 3 to 10 years and often features higher rates than CDs.
• Single Premium Immediate Annuity(SPIA): An SPIA converts a lump sum into guaranteed income that starts within a year.

What This Mean Look Like for You
Linda, 67, wants a steady income she can count on during retirement. She chooses a MYGA that guarantees 4.8% annually for five years, providing her with predictable growth without worrying about market swings.

Fixed Index Annuities

Fixed index annuities provide a middle ground between safety and growth. Your earnings are tied to a stock market index, but floors protect your principal from losses while caps limit gains.

They offer a way to capture some market upside without risking your savings, which is appealing if you want growth potential with a safety net.

What This Could Look Like for You
David, 62, wants more growth than a fixed annuity but fears market losses. He chose a fixed index annuity tied to the S&P 500 with a 0% floor. When the market dipped, his savings stayed protected — and when it rose, he gained a portion of the upside.

Variable Annuities

Variable annuities work more like investment accounts inside an insurance contract. Your money goes into subaccounts such as stocks, bonds and funds, and your income fluctuates based on market performance.

Because your principal isn’t guaranteed, this type of annuity carries more risk, but there is also more upside. Investors can benefit from tax-deferred growth and optional income riders.

What This Could Look Like for You
Mark, 58, already has a steady income from his pension and Social Security. He chose a variable annuity for its tax-deferred growth, accepting market fluctuations in exchange for higher return potential.

Compare The Types of Annuities

Feature	Fixed Annuity	Fixed Index Annuity	Variable Annuity
Risk Level	Lowest – guaranteed interest	Moderate – tied to index, with floors/caps	Highest – tied to market subaccounts
Growth Potential	Low – predictable, steady growth	Moderate – partial market gains	High – fully market dependent
Principal Protection	Yes	Yes (with limited upside)	No
Best For	Conservative savers	Balanced investors	High-income, risk-tolerant investors
Common Uses	Reliable retirement income	Growth and protection	Tax-deferred investment growth
Example Product	MYGA (Multi-Year Guaranteed Annuity)	S&P 500–linked FIA	Variable annuity with subaccounts

Immediate vs. Deferred Annuities

Once you’ve identified the best type of annuity for your goals, the next question is when you want income to begin. Timing can make just as much difference as the contract itself.

• Immediate annuities: Immediate annuities start paying income within the first year, often using a lump sum from a savings or retirement account. They’re designed for those who are retiring now and want quick income to replace their paycheck.
• Deferred annuities: Deferred annuities delay payouts until a future date, allowing your investments to grow tax-deferred. They’re a fit for long-term planners who want to secure income later in life.

There are some key differences to consider to help you determine which type of annuity best aligns with your retirement strategy.

Compare Immediate vs. Deferred Annuities

Feature	Immediate Annuity (SPIA)	Deferred Annuity
When Payments Start	Within 12 months of purchase	Years later, typically at retirement
Typical Funding	Lump sum	Lump sum or flexible contributions
Growth	Minimal for guaranteed income	Tax-deferred growth until payouts begin
Best For	Immediate income for retirees	Future income for long-term planners
Common Uses	Paycheck replacement at retirement, expenses	Delayed Social Security, tax-deferred growth
Flexibility	Fixed income stream	Choice of start date, riders and payout period

Other Annuity Options

Annuities can be tailored to your specific retirement needs through with specialized products. Some focus on delayed income, while others are designed for tax planning or long-term care. Some even serve unique purposes, such as charitable giving or workplace benefits.

These are some popular annuity options and how they can benefit your retirement strategy.

Product Type	Purpose
Qualified Longevity Annuity Contract (QLAC)	Helps with RMD planning
Registered Indexed-Linked Annuity (RILA)	Market-linked with capped losses
Long-Term Care Annuity	Coverage overage for long-term care expenses
Charitable Gift Annuity	Income for donor, remainder to charity
Group/Employer Annuity	Available via workplace plans
Thrift Savings Plan (TSP) Annuity	Uses funds from a TSP account

Why People Choose Annuities

For most retirees, annuities aren’t about chasing the highest return. They’re about striking a balance between safety, growth, and timing to match your personal goals. Whether you’re worried about outliving your savings, delaying Social Security or protecting your spouse’s financial future, annuities can be structured to meet those needs, helping to ensure a more rewarding retirement.