Advantages of Fixed Annuities A fixed annuity offers a high degree of safety. Your principal and interest are guaranteed by and subject to the claims-paying ability of the issuing insurance company. There is no stock market risk. Your earnings grow tax-deferred until you withdraw them. A variable annuity offers you the increased earning potential of securities investing.
Experienced professionals manage the investment options, called sub-accounts.
This gives you the ability to take advantage of the diversification among the securities in each of the portfolios. If your current investments are in higher risk programs, the safety and predictability of a fixed annuity may help balance your portfolio mix and reduce overall risk. Still, if you are a long term investor, the history of the stock market indicates that variable annuities can be a viable investment. Investors who are close to retirement tend to prefer the guaranteed returns of fixed annuities rather than risk their retirement nest egg to the short-term volatility of the stock market. Conversely, those investors who still have a long way to go before retirement may prefer the higher long term earning potential of a variable annuity.