Variable annuities are for investors who are willing to take a little more investment risk.
In a variable annuity, the investor is in the decision-making seat. He or she may choose a more aggressive or more conservative investment approach than what the insurance company might choose. An investor makes deposits into a variable annuity contract and then can direct the insurance company to invest the money into a guaranteed interest area, a common stock area, a bond area, a money market area, or a growth stock area. A variable annuity shifts the investment risk from the company to the investor. A fixed annuity is an annuity in which the insurance company promises to pay a fixed rate of return for a period of time regardless of the company's investment performance.