What defines a fixed annuity?

A fixed annuity is characterized by its provision of a guaranteed fixed benefit amount to the annuitant. This means that the payments received over time are predetermined and do not fluctuate with market conditions. The financial predictability offered by fixed annuities makes them appealing for individuals seeking stability in their income during retirement or for other financial planning purposes.

Fixed annuities are typically funded through a single premium or multiple premium payments, and in return, the insurance company agrees to provide income payments at a specified future date. This structure helps policyholders to clearly understand their expected income stream, which is especially beneficial for retirement planning.

In contrast, other types of annuities may involve variable benefits that change based on specified conditions, such as market performance. High-risk investments generally carry the potential for higher returns along with a greater chance of loss, which is not the case with fixed annuities as they focus on stability rather than growth derived from market volatility.