What is a fixed annuity?
What Is a Fixed Annuity? A fixed annuity is a type of insurance contract that promises to pay the buyer a specific, guaranteed interest rate on their contributions to the account. By contrast, a variable annuity pays interest that can fluctuate based on the performance of an investment portfolio chosen by the account's owner.
Are variable annuities risky investments?
Because variable annuities are invested in subaccounts you will be exposed to market risk. 1 During a variable annuity’s accumulation phase, if all goes well, your balance will increase due to investment growth. However, when a recession hits, your balance may decline if the investment vehicle in which it is parked contracts in value.
Is it safe to invest in annuities?
As for the insurance backing the annuity, it is generally safe no matter the market backdrop, as the insurance industry is highly regulated and required to hold a certain amount of reserves to meet liabilities. Investopedia requires writers to use primary sources to support their work.