What are the differences between fixed and variable annuities

Fixed

During the accumulation period of a fixed deferred annuity, your money earns interest at rates set by the insurance company or in a way spelled out in the annuity contract. The company guarantees that it will pay no less than a minimum rate of interest. During the payout period, the amount of each income payment to you is generally set when the payments start and will not change.

Variable

During the accumulation period of a variable annuity, the insurance company puts your premiums into a separate account. You decide how the company will invest those premiums, depending on how much risk you want to take. You may put your premium into a stock, bond, or other account, with no guarantees, or into a fixed account, with a minimum guaranteed interest. During the payout period, the amount of each income payment to you may be fixed (set at the beginning) or variable (changing the value of the investments in the separate account).

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