Series 26: Types Of Annuities

Types of Annuities

Deferred annuities come in two types: fixed annuities and variable annuities. Fixed annuities earn a fixed interest rate on the funds the holder deposits. Periodic payments come in fixed dollar amounts. Variable annuities invest the holder’s money deposits in a portfolio of securities. Periodic payments vary, depending on the success of the investments made within the account.

One annuity that blends the fixed and variable options is called an equity-indexed annuity. Its rate of return varies based on an index of securities, such as the S&P 500, but is restricted to some fixed range. For example, returns may be capped at some maximum rate, such as 12%, or guaranteed not to fall below some minimum,