Difference Between Fixed and Variable Annuities:

Fixed and variable annuities differ in the way they generate earnings and also in the amount of risk.

When you buy a fixed annuity, the insurance company guarantees you an interest rate for an initial period of time. At the end of this period the company will declare a renewal interest rate. In addition, most fixed annuities have a minimum interest rate that is guaranteed for the life of the contract. Fixed annuities typically appeal to investors who feel more comfortable knowing exactly how much their money is worth and earning.

With a variable annuity, you have added control over the investment dollars. You allocate your funds among a variety of investment options with objectives ranging from aggressive to conservative. Your rate of return is tied to the performance of the underlying investments of the sub-accounts. Variable annuities typically appeal to investors who are willing to accept a higher level of risk for a higher growth potential.