Types of Annuities
There are several different types of annuities and a wide variety of “riders” you can add.
Let’s first look at some of the basic kinds of annuities.
A fixed rate annuity has a stated rate of return and no loss of principal due to market downturns.
Fixed rate of return. No loss of principal.
A fixed indexed annuity has a rate of return that may be linked to an external market index (like the S&P 500), but still may offer a minimum rate of return and no loss of principal or interest credits if the market index declines.
If stocks rise, returns rise. May include a guaranteed minimum rate of return. No loss of principal.
A variable annuity offers a choice of investment sub-accounts, similar to the choices in a 401(k), providing a chance to earn higher returns than a fixed annuity or fixed indexed annuity but with greater risks, including potential loss of principal.
Choice of investments. Possibility for higher than fixed or indexed return. Can lose principal.