Indexed Annuities: Comparing Them to Fixed and Variable

If you are looking at purchasing annuities, indexed annuities are definitely something that you will want to consider. This type of annuity is different from fixed or variable annuities, but it does share some common features. Here are a few things to consider about indexed annuities when compared to fixed and variable annuities.

Interest Rate

One of the biggest differences between the annuities is the way that the interest rates are determined. With a fixed annuity, you get a fixed interest rate throughout the life of the annuity. With a variable annuity, the interest rate will fluctuate depending on the performance of the investments that you choose. With an indexed annuity, the rate that you get will depend on the performance of a financial index such as the S&P 500. This allows you to get some exposure to the stock market with the funds in your annuity.

Guarantees and Maximums

An indexed annuity typically carries with it a minimum guaranteed interest rate and a maximum rate that can be earned. If the index performs poorly, the insurance company will still provide you with some kind of return. If it does well, you may not be able to earn the same rate as the index. Fixed annuities also have a guaranteed interest rate. With a variable annuity, there are no guarantees or maximums.

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