Fixed annuity / Variable annuity, what is the difference?
November 18, 2009 by Annuity and Structured Settlement Tips
Filed under More Annuities Answers
Can you answer louann_63043’s question about Annuities?:
I want the annuity that is the safest investment for my money. My goal is to not loose any more money in the stock market. Which annuity is best for me?
Structured Settlement Protection
I want the annuity that is the safest investment for my money. My goal is to not loose any more money in the stock market. Which annuity is best for me?
Structured Settlement Protection
Annuities Feedback: Fixed is safest. It offers a fixed growth rate no matter how the market performs and you can never lose principal. With Variable, the rate changes with the market and you can actually lose the money you invest in the first place. The potential for growth is higher but so is the potential for loss.
Annuities Feedback: Fixed is by definition safer, since your guaranteed payment is higher than with a variable annuity.
The main downside to a fixed annuity is that inflation can reduce the buying power of the payments. The benefit of a variable annuity is that it can grow with the stock market to help balance against inflation. However, they are 100 times more complex than fixed annuities. I looked at one that someone was trying to sell to my parents, and it had all kinds of tricks that made it seem better than it was. Frankly speaking, no one should buy a variable annuity because of this reason. Splitting your money between a fixed annuity and a stock mix (ETF’s, stocks, mutual funds, etc.) is a much better alternative.