What Are The Different Types Of Annuities?
Annuities can be immediate or deferred. This is simply whether the income payments begin right away or later. Annuities can also be fixed or variable.
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 the rate isn’t guaranteed until it is credited to your account. With a fixed annuity you are not investing directly in the market and insurance companies must promise that your money is protected from market losses for it to qualify as a fixed annuity.
Money in a variable annuity earns a return based on how the investments you choose perform. Your investments are called “subaccounts” which are investments in mutual funds or other investment products. Your investment choices likely will have different types of risk and will affect the return you earn on your annuity. You may also have a choice to put some money into a fixed account with a guaranteed minimum interest rate. If the value of the subaccounts goes down, you may have less money in your annuity than you paid into it.