A variable annuity may result in your earning either more or less than the amount of money you receive in interest earnings from a traditional fixed-dollar annuity. Conservative investors who are more interested in protecting the principal of their investment and receiving a competitive fixed rate of return may be more comfortable with the safety offered by a traditional fixed-dollar annuity. In other words, insurers invest variable annuity money separately from their other assets. Variable annuitites are often referred to as self-directed investments because the investor can choose to invest your money in a variety of stock or bond portfolios. Your rate of return will fluctuate as the value of the underlying investments move up and down.
Variable annuities are uncertain compared to traditional fixed-dollar annuities.
If the funding options you choose for your annuity perform well, they may exceed the inflation rate or fixed annuity returns. If they don't, you may lose not only prior earnings, but even some of your principal. This higher risk may also place your annuity assets at risk since the financial strength of the insurance company may also be placed in jeopardy if the aggressive investment strategy doesn't work out. SPDA is the acronym for Single Premium Deferred Annuity . The money you invest is guaranteed by the insurance company and grows at a competitive, tax-deferred interest rate.