When most people think about income, they think about a paycheck. But as you approach retirement, your income sources often shift—and that’s where solutions like annuities can play an important role.
June is National Annuity Awareness Month, making it a great time to explore how annuities can help support your long-term financial goals and provide income in retirement.
If you’re considering an annuity, you may be deciding between two common options: fixed annuities and variable annuities. While both can help provide income later in life, they work in different ways and serve different needs.
What Is an Annuity?
An annuity is a financial contract between you and an insurance company designed to help provide income—typically in retirement. You contribute funds through a lump sum or a series of payments, and in return, the annuity can provide income at a later date.
While annuities share some similarities with investment accounts, they are structured as insurance products, not traditional investments.
Fixed Annuities: Stability and Predictability
A fixed annuity offers a guaranteed interest rate and a predictable stream of income. Because your returns aren’t tied to market performance, your payments remain steady regardless of economic conditions.
Key features:
- Guaranteed interest rate
- Predictable income payments
- Protection from market fluctuations
- Tax-deferred growth
Fixed annuities are often a good fit for individuals who value consistency and security, especially those looking for a dependable income stream in retirement.
Related: Averse to Risk? Annuities May be the Answer
Variable Annuities: Growth Potential with Market Exposure
A variable annuity also provides income in retirement, but its value is tied to the performance of underlying investment options. This means your payments can fluctuate based on market conditions.
Key features:
- Returns linked to market performance
- Potential for higher growth
- Flexible investment options
- Tax-deferred growth
With a variable annuity, there is greater opportunity for growth, but also increased exposure to market risk.
Fixed vs. Variable Annuities: What’s the Difference?
The primary difference comes down to risk and predictability:
- Fixed annuities provide steady, predictable income and protection from market volatility.
- Variable annuities offer growth potential, but income can rise or fall depending on market performance.
Both can play a role in retirement planning; it’s simply a matter of which aligns best with your needs and comfort level.
Which Type of Annuity Is Right for You?
The right choice depends on your personal financial goals, income needs, and risk tolerance.
Consider questions like:
- Do you want guaranteed, predictable income in retirement?
- Are you comfortable with market fluctuations in exchange for growth potential?
- What other income sources will you rely on during retirement?
- How much flexibility do you need in your financial plan?
If stability is your top priority, a fixed annuity may be a better fit. If you’re seeking growth and are comfortable with some risk, a variable annuity could be worth exploring.
Related: Navigating Annuity Payout Options
Making an Informed Decision
Both fixed and variable annuities can help support your retirement strategy—but it’s important to understand how each works, including any fees, features, and limitations.
National Annuity Awareness Month is a great reminder to take a closer look at your retirement income plan and make sure it aligns with your goals.
If you’re considering an annuity, speaking with a financial professional can help you evaluate your options and determine what makes the most sense for your situation.
Want more? Check out our blog, Types of Annuities Explained: Evaluating Your Retirement Income Options
We’re Here for You!
Bankers Life is here to help customers with their financial and insurance needs so please visit us at BankersLife.com to learn more.
Bankers Life Securities, Inc., Bankers Life Advisory Services, Inc., and their representatives do not provide legal or tax advice. Each individual should seek specific advice from their own tax or legal advisors.
This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors. To determine which investment(s) may be appropriate for you, please consult your financial professional prior to investing.
Bankers Life is the marketing brand of various affiliated companies of CNO Financial Group including, Bankers Life and Casualty Company, Bankers Life Securities, Inc., and Bankers Life Advisory Services, Inc. Non-affiliated insurance products are offered through Bankers Life Securities General Agency, Inc., (dba BL General Insurance Agency, Inc., AK, AL, CA, NV, PA).
Securities and variable annuities offered through Bankers Life Securities, Inc. Member, FINRA/SIPC (dba BL Securities Inc., AL, GA, IA, IL, MI, NV, PA). Advisory products and services offered by Bankers Life Advisory Services, Inc. SEC Registered Investment Adviser (dba BL Advisory Services, Inc., AL, GA, IA, MT, NV, PA).
Investing involves risks including possible loss of principal. No investment strategy or risk management technique can guarantee return or eliminate risk.
Investments are: Not Guaranteed—Involve Risk—May Lose Value.
