Fixed vs Variable Annuities

Annuities are agreements between you and an insurance company that you will get paid throughout a specific period with a certain interval between payments. Fixed and variable annuities are the most common annuity plans. While there are slight variations to these two classifications, most annuities fall under these two categories. 

 

Fixed annuities have steady, fixed rates of return and are generally made of bonds that allow for a consistent, regular payout to you, the annuitant. 

Variable annuities have inconsistent, variable rates of return and can be held in any number of fluctuable sources, such as stocks or mutual funds.


What Do Fixed and Variable Annuities Have in Common?

Fixed and variable annuities are both a form of insurance-based payment contracts. People often use fixed and variable annuities as a way to ensure a steady flow of income after retirement.

Both fixed and variable annuities may help fulfill your financial goals, but it all comes down to when you expect to get your money back — and how willing you are to take risks with your investment.
 
  • Both fixed and variable annuities grow tax-deferred.
  • They have no upper limit on contributions.
  • You can choose how you want to receive payment from your annuity:  lump-sum withdrawals, periodic withdrawals or both.


What’s the Difference Between Fixed and Variable Annuities?

Fixed and variable annuities have very different characteristics. Here, we dive into the specifics of each form:

Fixed Annuities Features and Details
 
  • After the age of 59 and a half, you can take your money out of fixed annuities at a rate of 10% or less per year with no negative repercussions for withdrawing your money early. 
  • To have a beneficiary receive your annuity in the event of your passing on, you will most likely need to set up a death benefit rider account, which can be expensive at times.
  • Fixed annuities are guaranteed by an insurance company — not the government. If the company fails, you are not guaranteed your money.
  • There are a variety of fees associated with fixed annuities that include general annual fees, commission expenses for your annuity clerk, income rider costs, and surrender charges.

 

Variable Annuities Features and Details

  • The value of variable annuities is not guaranteed because of their distribution into sub-accounts like stocks, bonds, money market funds, and other similar divisions.
  • It’s possible for you to spend the entire worth of your variable annuity before death or lose all profits after death (for beneficiaries). Purchasing an income rider plan could mitigate this issue.
  • There are fees associated with variable annuities which act as a means of managing them effectively. Generally, companies charge a general administrative fee for variable annuities as well as investment management charges for the control of the sub-accounts that make up your annuity.

 

Get a Quote for Your Fixed or Variable Annuity Payments Today

For over 25 years, J.G. Wentworth has specialized in purchasing payments from fixed and variable annuities. We want to help you reach your financial goals and deliver your cash fast. For a free, no obligation quote, call us today or continue browsing our website.

 

J.G. Wentworth is a purchaser of assets and does not provide legal, tax, or financial advice. Please consult with independent professionals for such advice. All transactions are at J.G. Wentworth’s sole discretion.

 
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