Fixed and Variable Annuity - Equally Important As Per Our Needs

Annuities were invented to solve your investment problems. They term to be a perfect portfolio for your savings, where you can save your savings on long term basis to receive a fixed rate of return through fixed annuity. For those interested in higher returns, investing in variable annuity is the right decision. These two types of annuities help you to get the potential for tax-deferred growth.

Both these annuities are present to offer you best saving option. However, they come in a package bringing along their advantages and disadvantages.

Difference between fixed and variable annuity:

•     Fixed annuity offers you a fixed rate of return on your investments without any risk attachment whereas there are lots of risks involved in variable annuity. But variable annuity offers you higher rate of returns as compared to fixed annuity.
•    The rate of interest is fixed in fixed annuity which is well known by the investor to which he associates some amount of comfort level for the one. In variable annuity rate or return is not fixed and thus, one cannot rely on its income as it is not fixed and regular.
•    Unlike fixed annuity, in variable annuity you can control your contract where the value of your sum will be invested. You can also be aggressive or conservative in variable annuity but within the limits penned down in the contract.

Resemblance of fixed and variable annuity

Fixed and variable annuity offers you tax-deferred growth and a death benefit. If an annuitant dies before the contract of payment, his or her beneficiaries would receive all the purchase payments including any gathered earnings.  

How to choose for the one between Fixed and Variable annuity:

Choosing the one annuity among the fixed and variable depends on your choice and functioning. Choosing any of the annuities adds extra coverage to you savings and investment assortment. If you need flexibility in your plans according to the changing circumstances, you need to go with variable where if you are looking forward for fixed return on your investment, you need to go with fixed investment plans.

Both the annuities will definitely you tax-deferred growth and death benefit. But, if you are seeking activity in your contract without looking for high security, you can go with variable annuity.

If there are any withdrawal decisions made before the age of 59 and half, one needs to pay 10% penalty charge.  An annuity’s benefits are conditional only till the insurance company is able to pay the claim. In variable annuity, the amount keeps on fluctuating according to the market level and thus, increases your principal amount more or less to the original amount.