Understanding the distinctions can help clarify whether one may fit within your retirement strategy. Annuities are tools designed for specific objectives — whether that is principal protection features, structured growth potential, or lifetime income.
Fixed annuities
Fixed annuities credit a declared interest rate (or schedule of rates) set by the insurance company. They’re often considered when predictability matters more than market participation.
Fixed indexed annuities
A fixed indexed annuity links potential interest credits to the performance of a market index (such as the S&P 500), while typically offering protection against market losses to principal under the contract’s terms. Upside is usually limited by caps, participation rates, or spreads.
Variable annuities
A variable annuity allows funds to be allocated to subaccounts that can rise or fall with markets. These are often considered by individuals comfortable with market risk who also want tax-deferred growth inside an insurance contract. They can include fees and optional living-benefit riders.
Immediate vs deferred
An immediate annuity converts a lump sum into income payments that typically begin within 30 days to 12 months. Deferred annuities are commonly used during the accumulation phase before retirement and can be structured as fixed, indexed, or variable.
Product features, guarantees, and costs vary by carrier and contract. This overview is educational and not a recommendation.