What is the difference between fixed annuities and variable annuities?

The main difference between fixed annuities and variable annuities lies in how the investment returns are generated and the level of risk involved. Fixed annuities provide a guaranteed rate of return, meaning the investor receives a predetermined interest rate for a specified period. This fixed nature offers a sense of security, as the investor knows exactly what to expect in terms of income. The principal investment remains protected, making fixed annuities an appealing option for those looking for a low-risk retirement savings vehicle. On the other hand, variable annuities allow investors to allocate their funds among various investment options, typically including mutual funds, which can vary in risk and potential returns. The performance of a variable annuity depends on how the selected investments perform over time. This means that while variable annuities have the potential for higher returns, they also carry a greater risk, including the possibility of losing principal. Additionally, variable annuities often come with management fees and other charges that can affect overall returns. Ultimately, the choice between fixed and variable annuities depends on individual financial goals, risk tolerance, and investment preferences. Fixed annuities may be more suitable for those seeking stability and guaranteed income, whereas variable annuities may attract those who are comfortable with market risk and are looking for growth potential in their investments. For more specific information or advice regarding individual situations, it is advisable to refer to the current web page for contact information and additional resources related to The Variable Annuity Life Insurance Company.