Every annuity type, and the one trade each one makes.
There are five shapes of annuity in common use. Each trades a different amount of certainty for a different amount of upside. Once you see the trade, the names stop mattering.
The five types
MYGA — multi-year guaranteed annuity
The trade: all certainty, no upside. A fixed rate guaranteed for a set term. Functionally a CD issued by an insurer, with tax deferral and a different safety backstop. Simple enough to compare on one number. Full MYGA guide.
Fixed indexed annuity (FIA)
The trade: a floor, paid for with a ceiling. Returns track a market index but can't go below zero in a bad year. You pay for that floor through a cap, participation rate, or spread that limits gains in a good year. You cannot lose principal to market movement; you also won't get the index's full return.
Buffered annuity / RILA
The trade: a cushion, not a floor. The insurer absorbs the first slice of loss — often 10% or 20% — and you take anything beyond it. In exchange the cap is usually higher than an FIA's. You can still lose money here. That's the part people miss when it's presented alongside indexed products.
Variable annuity (VA)
The trade: full market exposure, wrapped in fees. Money goes into subaccounts that behave like mutual funds, with tax deferral around them. No caps, but no floor either, and typically the highest cost structure in the category. Pros and cons.
Income annuity (SPIA / DIA)
The trade: your lump sum, for income you can't outlive. A single premium immediate annuity starts paying right away; a deferred income annuity starts later and pays more for the wait. You generally give up access to the principal entirely. This is the only type that does the one thing nothing else can do.
Fixed vs indexed: the actual difference
People search for this constantly, and the answer is simpler than the marketing suggests.
A fixed annuity pays a rate the insurer declares. You know the number in advance, and it doesn't depend on anything outside the contract.
A fixed indexed annuity pays a rate derived from an index's movement, subject to a cap, participation rate, or spread. You don't know the number in advance. You know only the floor — usually zero — and the formula.
Both protect principal from market loss. The fixed annuity is predictable and usually lower; the indexed one is variable within a bounded range. Neither is "safer" than the other in the sense people mean: the safety comes from the insurer in both cases.
Two terms worth knowing
MVA — market value adjustment
An adjustment applied if you surrender early, tied to how interest rates have moved since you bought. Rates up since purchase generally means a reduction on top of any surrender charge. It cuts both ways in theory; in practice it's usually a cost.
Flexible premium vs single premium
Single premium means one lump sum. Flexible premium means you can add money over time. Most deferred annuities sold to savers are flexible; most income annuities are single premium.
This page is educational and general. It is not a recommendation, and it is not tax or legal advice. Contract terms vary by carrier, product, and state. Annuity guarantees depend on the financial strength and claims-paying ability of the issuing insurer. Read your own contract, or bring it to us and we'll read it with you.
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