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 with added risk.

The three most common types — fixed, fixed index, and variable annuities — fall along a spectrum from safest to riskiest. The tiles below break down how each works so you can quickly see where they fit into your retirement plan.

Fixed Annuities

Fixed annuities are the simplest type. 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 who want income they can count on.

Common products include:

• MYGA (Multi-Year Guaranteed Annuity): Locks in a fixed rate for 3–10 years, often higher than CDs.
• SPIA (Single Premium Immediate Annuity): Converts a lump sum into guaranteed income that starts within a year.

What This Could Look Like for You
Linda, 67, wants a steady income she could count on in retirement. She chose a MYGA that guaranteed 4.8% annually for five years, giving her 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 (stocks, bonds, funds), and your income fluctuates with market performance.

Because your principal isn’t guaranteed, they carry more risk, but also more upside. They also provide tax-deferred growth and optional income riders.

What This Could Look Like for You
Mark, 58, already has a steady income from Social Security and a pension. He chose a variable annuity for its tax-deferred growth, accepting market ups and downs 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	Predictable, steady	Moderate – capture 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 + protection mix	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 type of annuity that matches 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 start paying income within the first year, often using a lump sum from savings or a retirement account. They’re designed for people who are retiring now and want to replace a paycheck quickly.
• Deferred annuities delay payouts until a future date, giving your money time to grow tax-deferred. They’re a fit for long-term planners who want to secure income later in life.

The table below highlights the key differences between the two approaches so you can quickly see which aligns with your retirement strategy.

Compare Immediate vs. Deferred

Feature	Immediate Annuity (SPIA)	Deferred Annuity
When Payments Start	Within 12 months of purchase	Years later (often at retirement)
Funding	Typically a lump sum	Lump sum or flexible contributions
Growth	Minimal – focus is on guaranteed income now	Tax-deferred growth until payouts begin
Best For	Retirees needing income right away	Long-term planners preparing for future income
Common Uses	Replace paycheck at retirement, cover expenses	Delay Social Security, grow tax-deferred
Flexibility	Low funds are locked into an income stream	Higher – choose start date, riders, payout length

Other Annuity Options

Beyond the three main categories, annuities can be tailored with specialized products that address specific retirement needs. Some focus on delaying income until later in life, others are designed for tax planning or long-term care, and a few serve unique purposes like charitable giving or workplace benefits.

The table below highlights these additional options and the roles they can play in a 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	Provides coverage for care needs
Charitable Gift Annuity	Income for donor, remainder to charity
Group/Employer Annuity	Offered through workplace plans
Thrift Savings Plan (TSP) Annuity	Purchased using funds from a TSP account

Why People Choose Annuities

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