Fixed vs. Variable Annuities: A Comprehensive Comparison

Both fixed and variable annuities can provide you with some benefits when planning for your retirement. These tools each have some unique features for you to consider.

Interest Rate

One of the biggest differences between these two types of investments is the interest rate that you will earn. With a fixed annuity, you are going to earn a fixed rate of interest over the life of the annuity. With a variable annuity, your interest rate will depend on the performance of the investments in your portfolio. This means that the interest rate can fluctuate up and down from one year to the next.

Passive vs. Active

Another difference between these two types of annuities is in the way that investments are handled. With a fixed annuity, you simply pay your money to the insurance company and they handle the investment for you. With a variable annuity, you are in charge of selecting your individual investments. You will have a list of investments to choose from, such as mutual funds and bonds, and you will be in charge of selecting them. If you prefer to invest passively, a fixed annuity is probably the best option for you. If you like more control over your investments, variable annuities would be a better choice.