There are fixed annuities, fixed/indexed annuities, variable annuities, hybrid annuities, income annuities, period income annuities, and possibly more.

Insurance companies, and the insurance subsidiary wings of investment companies, have had many years to develop strategies and marketing ploys that help clients accumulate, protect, and distribute assets within various kinds of annuities.

Variable annuities allow the annuitant to participate in the market through mutual funds — or, more accurately, “separate accounts” that mimic mutual funds.

Fixed annuities can be single premium immediate annuities (SPIAs) or deferred income annuities, both of which pay income for life, and can also pay out for joint-life scenarios. Fixed annuities can also accumulate a fixed rate of return in a way that often outpaces CDs and other conservative instruments. The investor would then roll them into another period annuity, in many cases.

There are also fixed period income annuities, but these have not looked attractive in a while due to low interest rates: these earn a modest rate of return while paying back the principal and interest amount to the owner/annuitant over a certain number of years (but not a lifetime).

Fixed indexed annuities are not variable products, technically, because the annuitant is not investing in the market directly and the insurance agent or advisor is not helping to manage specific investments.

Instead, the insurance company uses a portion of the gains they get in there general fixed account to invest in derivatives like calls, puts, and futures that will help them to achieve additional returns from major market indexes.

Indexed annuities are among the most complicated of these choices, and they are sold by agents who do not have to hold securities licenses, so we encourage you to tread lightly when it comes to those.

What Investment Options Do Annuities Have?
What is the “Period Income” Option on Annuities?