What are the differences between a variable annuity and a fixed annuity?
If you choose a fixed annuity, the premiums you pay will be invested by the insurance company. The company board will declare a current rate of interest each quarter. If the rate declared is less than the guaranteed rate, the guaranteed rate will be paid. A variable annuity works more like a mutual fund. Your premiums will be invested in stock funds, bond funds, real estate funds or other kinds of cloned mutual funds that have no guaranteed rate of return. Instead, your return will vary based on the portfolios performance – hence the term “variable.” What is a tax-deferred fixed annuity? All annuities sold by insurance companies are tax deferred. The term, “tax-deferred annuity” refers to a tax-favored savings program available under code section 403(b) to public school employees and the employees of nonprofit organizations. A fixed annuity contract is a contract between you and an insurance company in which the company, in exchange for a single or flexible premium, guarantees a fixed
