Rachel Christian, writer and researcher for RetireGuide
  • Written by
    Rachel Christian

    Rachel Christian

    Financial Writer and Certified Educator in Personal Finance

    Rachel Christian is a writer and researcher for RetireGuide. She covers annuities, Medicare, life insurance and other important retirement topics. Rachel is a member of the Association for Financial Counseling & Planning Education.

    Read More
  • Edited By
    Matt Mauney
    Matt Mauney, Senior Editor for RetireGuide

    Matt Mauney

    Financial Editor

    Matt Mauney is an award-winning journalist, editor, writer and content strategist with more than 15 years of professional experience working for nationally recognized newspapers and digital brands. He has contributed content for ChicagoTribune.com, LATimes.com, The Hill and the American Cancer Society, and he was part of the Orlando Sentinel digital staff that was named a Pulitzer Prize finalist in 2017.

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  • Financially Reviewed By
    Toby Walters, CFA®
    Toby Walters, CFA

    Toby Walters, CFA®

    Chartered Financial Analyst and Paraplanner

    Toby Walters, CFA®, has over 25 years of financial research experience. With a knowledge and understanding of researching and analyzing financial data, he has developed a unique and experienced viewpoint on money matters. He has been a chartered financial analyst since 2003, and most recently a portfolio analyst and paraplanner.

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  • Published: May 8, 2020
  • Updated: July 6, 2023
  • 6 min read time
  • This page features 6 Cited Research Articles
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A qualified expert reviewed the content on this page to ensure it is factually accurate, meets current industry standards and helps readers achieve a better understanding of retirement topics.

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How to Cite RetireGuide.com's Article

APA Christian, R. (2023, July 6). Types of Annuities. RetireGuide.com. Retrieved September 28, 2023, from https://www.retireguide.com/annuities/types/

MLA Christian, Rachel. "Types of Annuities." RetireGuide.com, 6 Jul 2023, https://www.retireguide.com/annuities/types/.

Chicago Christian, Rachel. "Types of Annuities." RetireGuide.com. Last modified July 6, 2023. https://www.retireguide.com/annuities/types/.

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Key Principles

RetireGuide’s mission is to provide seniors with resources that will help them reach important financial decisions that affect their retirement. Our goal is to arm our readers with knowledge that will lead to a healthy and financially sound retirement.

We’re dedicated to providing thoroughly researched annuity information that guides you toward making the best possible financial decisions for you and your family.

We partner with Senior Market Sales (SMS), a leader in the insurance industry with over 30 years of experience and a network of 66,000 independently licensed agents across the United States.

Our partnership with SMS (and Insuractive, the company’s consumer-facing branch) allows us to deliver expertly researched and reviewed content at no cost or obligation to all of our visitors. It also gives our visitors the opportunity to take the next step in their financial journey by requesting help from our partner through the phone numbers or forms provided on our website.

If a visitor chooses to inquire about an annuity or other financial product through SMS as a result of our research and accurate information, RetireGuide may receive compensation for connecting the visitor with SMS. The revenue we earn for helping visitors get the help they’re seeking makes RetireGuide stronger for our audiences.

The content and tools created by RetireGuide adhere to strict editorial guidelines to ensure quality and transparency.

Editorial Independence

While the experts from SMS are available to help you navigate various annuity options, RetireGuide retains complete editorial control over the information it publishes.

We operate independently from SMS, which allows the award-winning RetireGuide team to provide you with unbiased information.

Visitors can trust our inflexibility regarding our editorial autonomy. We do not allow our partnership to influence RetireGuide’s editorial content whatsoever.

What Are the Main Types of Annuities?

The type of annuity you buy determines your future annuity payments.

Fixed and variable refers to the size of payments you receive from the annuity company.

Annuities may also be immediate or deferred. This refers to when the insurer begins paying you money.

Similarities of All Annuities
  • Money in the account grows tax-deferred until you withdraw it.
  • The annuity establishes a contract between you and an insurance company.
  • Annuities provide periodic payments for a designated time.
Annuity Types
Fixed Annuities
A minimum rate of interest is guaranteed, and periodic payment amounts do not fluctuate.
Multi-Year Guaranteed Annuities (MYGA)
A type of fixed annuity designed to protect your premium and accumulate interest at a guaranteed rate for a specific amount of time, typically a period of three to 10 years.
Variable Annuities
Includes a separate account where money is typically invested in mutual funds. Value varies depending on the performance of these underlying investments. Variable annuities carry the greatest risk.
Indexed Annuities
Earns interest based on a market index, such as the S&P 500. Greater potential for gains than fixed annuities but with less risk than variable.
Deferred Annuities
Annuity payouts are delayed until a future date. This gives money in the account time to grow during a process known as the accumulation phase.
Immediate Annuities
Payouts begin shortly after you make a lump-sum payment to the insurance company.
Individual Retirement Annuities
An individual retirement annuity provides a guaranteed retirement income and functions similarly to traditional IRAs, but only invests in annuities. These annuities can be either fixed or variable, with varying levels of risk and reward.
TSP Annuities
TSP annuities are a retirement income choice for Thrift Savings Plan holders, which is a federal retirement savings plan for eligible government employees. By converting TSP funds into an annuity, individuals can receive guaranteed monthly payments that will continue for their lifetime.
Can you roll your IRA or 401(K) into an annuity?

Key Differences in Annuity Types

Exploring key differences side by side is one of the easiest ways to determine the best annuity type for you.

Compare Annuity Types
Annuity TypeProsConsFees
FixedSimple and straightforward. Based on a fixed rate of return. Lower payouts than other annuity options. None. However, there are usually surrender charges.
VariablePotential for greater returns than other options.Carries the most risk. You may lose your principal. Highest.
Immediate Payments begin within a year after purchasing it.You can no longer access the principal once payouts begin. None.
DeferredYou don’t pay taxes during the accumulation phase. Payments are delayed. Some.
STEP 1
STEP 2
STEP 3

How soon are you retiring?

STEP 1
STEP 2
STEP 3

What is your goal for purchasing an annuity?

Select all that apply

Learn About Top Annuity Products & Get a Free Quote

Find out how an annuity can offer you guaranteed monthly income throughout your retirement. Speak with one of our qualified financial professionals today to discover which of our industry-leading annuity products fits into your long-term financial strategy.

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Or fill out the form

STEP 1
STEP 2
STEP 3

How Long Will Payouts Last?

You can customize many aspects of your annuity contract, including how long you want to receive periodic payments.

Annuity payouts can last the rest of your life or only a certain amount of time.

Some annuities also allow you to leave remaining funds to a beneficiary upon your death. Others turn your remaining balance over to the insurance company instead.

Annuity Payout Options
Single Life/Life Only
Payments for life but no survivor benefit.
Life Annuity with Period Certain
Guarantees payments for life while also ensuring a beneficiary receives the rest of your annuity payments if you pass away during a certain time.
Joint and Survivor Annuity
Payments last the lifetime of you and a survivor — usually a spouse.
Interested in Buying an Annuity?
Learn how annuities provide premium protection, guaranteed retirement income and long-term care benefits through our partner Annuity.org.
REQUEST YOUR FREE QUOTE →

Using Annuities for Retirement Income

A growing concern for many older Americans is outliving their savings during retirement. In 2020, the average cost of retirement was $987,000, according to 24/7 Wall Street.

Annuities act as insurance against this risk. They provide a reliable stream of income tailored to meet your needs.

Immediate fixed annuities and variable annuities are two popular options to safeguard retirement income.

Immediate fixed annuities are the most common type of annuity. They share many similarities with pensions.

To purchase one, you pay an insurance company a lump sum of money. In return, the insurer guarantees to pay you a fixed monthly payment.

If there’s still money left in the annuity when you die, it goes back to the insurance company.

Variable annuities allow you to retain control over your principal. However, the size of your regular payout depends on the performance of underlying investments.

To protect against market instability, many insurance companies offer additional riders at an extra cost.

A guaranteed lifetime withdrawal benefit rider, for example, allows you to take money out of a variable annuity at a certain minimum level, regardless of market performance.

Tips for Growing Retirement Income

An annuity can be a smart addition to your retirement plan. These insurance products should not substitute a well-balanced investment portfolio.

Annuities can be complex, and contract details may be difficult to navigate. It’s best to speak with a trusted financial advisor to identify the best retirement income vehicle for you.

It’s also important to consider other investment options that help diversify your portfolio. Maxing out your 401(k) or IRA contributions is a good place to start.

Fixed securities, such as bonds and certificates of deposit, are other popular savings vehicles for retirement. These investments guarantee a fixed rate of return with minimal risk.

Last Modified: July 6, 2023
Rachel Christian, writer and researcher for RetireGuide
Rachel Christian Financial Writer and Certified Educator in Personal Finance
Rachel Christian is a writer and researcher for RetireGuide. She covers annuities, Medicare, life insurance and other important retirement topics for RetireGuide. Rachel’s clear and concise writing style breaks down complex retirement topics and provides relevant information to our readers.
  • Member of the Association for Financial Counseling & Planning Education
  • Certified educator in personal finance
  • Former member of the American Finance Association
Edited By
Matt Mauney, Senior Editor for RetireGuide
Matt Mauney Financial Editor
Financially Reviewed By
Toby Walters, CFA
Toby Walters, CFA® Chartered Financial Analyst and Paraplanner

6 Cited Research Articles

  1. Sauter, M.B. (2020, August 17). Retirement living: Here's what it costs to retire comfortably in every state. Retrieved from https://www.usatoday.com/story/money/2020/08/17/what-it-costs-to-retire-comfortably-in-every-state/42209705/
  2. Business Wire. (2017, February 15). Merrill Lynch Study Finds New Retirement Realities Usher in Opportunities and Challenges. Retrieved from https://www.businesswire.com/news/home/20170215005147/en/Merrill-Lynch-Study-Finds-New-Retirement-Realities-Usher-in-Opportunities-and-Challenges
  3. CNN Money. (n.d.). What payout options do I have? Retrieved from https://money.cnn.com/retirement/guide/annuities_basics.moneymag/index8.htm
  4. U.S. Securities and Exchange Commission. (n.d.). What are annuities? Retrieved from https://www.investor.gov/introduction-investing/investing-basics/investment-products/insurance-products/annuities
  5. U.S. Securities and Exchange Commission. (n.d.). Immediate annuity. Retrieved from https://www.investor.gov/introduction-investing/investing-basics/glossary/immediate-annuity
  6. U.S. Securities and Exchange Commission. (n.d.). What are variable annuities? Retrieved from https://www.investor.gov/introduction-investing/investing-basics/investment-products/insurance-products/variable-annuities#What_Is