Fixed vs. Variable Annuities
Which is Right for You?
Annuities can be an effective part of your retirement plan, and choosing the right annuity is a critical step in building a secure financial future. Among the most common types of annuities are fixed and variable annuities, each with unique features and benefits. Understanding the differences between them can help you determine which option best fits your retirement goals.
What is a Fixed Annuity?
A fixed annuity provides a guaranteed interest rate for a set period, making it a low-risk option for those seeking stability and predictable growth. There are two common types:
- Multi-Year Guaranteed Annuities (MYGAs): These annuities lock in a fixed interest rate for a specified term, such as three, five, or seven years.
- Fixed Indexed Annuities (FIAs): FIAs offer growth potential linked to a market index, like the S&P 500, while protecting your principal from market losses.
Key Benefits of Fixed Annuities:
- Guaranteed growth and principal protection
- No Limited exposure to market volatility
- Tax-deferred savings
What is a Variable Annuity?
A variable annuity allows your investments to grow based on the performance of underlying funds, similar to mutual funds. While this offers the potential for higher returns, it also comes with higher fees and greater risk, as your account value can fluctuate with the market and potentially reduce your account value below your initial principal.
Key Benefits of Variable Annuities:
- Higher growth potential
- Wide range of investment options
- Tax-deferred savings
How Do Fixed and Variable Annuities Compare?
| Feature | Fixed Annuities | Variable Annuities |
| Risk Level | Low | Higher depending on investments chosen within the variable annuity |
| Growth Potential | Moderate, predictable | Higher and dependent on investments chosen within the variable annuity and market performance |
| Principal Protection | Yes | No |
| Inflation Risk | Yes – Inflation may out pace interest rates. | Lower risk – Growth potential could potentially outpace inflation |
| Fees | Typically low or none | Higher due to investment management costs, administrative fees, and mortality and expense charges |
| Surrender charges | Yes | Yes |
| Riders | Limited riders available | Many optional riders available (e.g., Guaranteed Minimum Income or Withdrawal Benefits) |
| Customization | Limited to crediting strategies | Wide range of investment options |
| Ideal For | Conservative savers, risk-averse individuals | Growth-oriented investors comfortable with market risk |
Factors to Consider when Choosing an Annuity
- Risk Tolerance:
- Fixed annuities are better for those with a more conservative risk tolerance, who want security and stable returns.
- Variable annuities suit individuals with higher risk tolerances and comfortable with market fluctuations.
- Financial Goals:
- If you prioritize preserving your principal and earning steady interest, a fixed annuity is ideal.
- For higher growth potential and a more aggressive approach, a variable annuity may be the better fit.
- Time Horizon:
- If you’re closer to retirement, a fixed annuity’s stability can provide peace of mind.
- Younger investors with a longer time horizon may benefit from the growth potential of a variable annuity.
- Fees:
- Fixed annuities typically have little to no fees.
- Variable annuities may have higher fees due to fund management, optional riders, administrative fees, and mortality and expense charges.
Work with a Financial Professional
Both fixed and variable annuities have their place in a comprehensive retirement strategy. A financial professional can help you evaluate your needs, risk tolerance, and goals to recommend the best option for you.
Discover the Oceanview Difference
- Financial Strength You Can Trust: Rated “A” (Excellent) by A.M. Best, showcasing our solid financial foundation, providing you with confidence regarding Oceanview’s commitment to meeting obligations.
- Simple, Transparent Retirement Solutions: Straightforward annuity products designed to help you meet your retirement objectives.
- Competitive Rates and Flexibility: Benefit from competitive rates and a variety of durations and crediting strategies.
- Client-Centric Approach: Features such as free withdrawals, nursing home and terminal illness waivers, and full liquidity for beneficiaries upon the annuitant’s death demonstrate our commitment to your financial security and peace of mind.
Disclaimers
Guarantees are based on the financial strength of the issuing carrier. The multi-year guarantee annuity product with form number IIC19 OLA SPDA, or variations of such, are issued by Oceanview Life and Annuity Company (d/b/a Oceanview Life and Annuity Insurance Company in California; NAIC# 68446). May not be available in all states. Not available in the state of New York or Vermont. Policy form numbers and provisions may vary. Rates are guaranteed depending on the guarantee period selected at policy issue.
Oceanview’s Single Premium Fixed Indexed Annuity Contract [ICC19 OLA FIA], product riders and state variations. Product features, limitations and availability may vary. Products not available in all states.
Annuities are generally designed as long-term retirement solutions and have certain limitations. They are generally not intended to replace emergency funds, serve as income for day-to-day expenses, or support short-term savings goals. Please review the contract for full details.
HARBOURVIEW ANNUITIES ARE PRODUCTS OF THE INSURANCE INDUSTRY AND NOT GUARANTEED BY ANY BANK NOR INSURED BY THE FDIC OR NCUA/NCUSIF OR ANY OTHER FEDERAL GOVERNMENTAL AGENCY. MAY LOSE VALUE. NO BANK/CREDIT UNION GUARANTEE. NOT A DEPOSIT. MAY ONLY BE OFFERED BY A LICENSED INSURANCE AGENT. GUARANTEES ARE SUBJECT TO THE CLAIM PAYING ABILITY OF THE ISSUING INSURANCE COMPANY.
Annuities issued by Oceanview Life and Annuity Company, 1331 17th St., Suite 1050, Denver, CO 80202. In California, doing business as Oceanview Life and Annuity Insurance Company www.oceanviewlife.com.
This material is a general description intended for general public, educational use. Oceanview Life and Annuity Company is not providing investment advice for any individual or in any individual situation, and therefore nothing in this correspondence should be read as such.
A.M. Best Rating as of December 11, 2024, is subject to change. A (Excellent) rating is third highest of fifteen possible rating classes for financial strength. The outlook assigned to these Credit Ratings is stable.
Withdrawals in excess of any Free Partial Withdrawal amounts are subject to a Surrender Charge and Market Value Adjustment (MVA). The MVA may have the effect of increasing or decreasing the Surrender Value of the withdrawal depending on the market interest rate changes.
The IRS may impose a penalty for withdrawals prior to age 59 ½.
Contracts purchased in an IRA or other tax-qualified plan provide no additional tax-deferral benefit, since they are already afforded tax-deferred status. All annuity features, risks, limitations, and costs should be considered prior to purchasing an annuity within a tax-qualified retirement plan. For non-qualified annuities, tax deferral is not available to corporations and certain other entities.
While care was taken in preparing this information and it is considered reliable, contract, application, illustration, and product disclosure language should be relied upon when contrary. The Company reserves the right to correct any typographical errors that may exist.
Funds allocated to an index do not directly participate or invest in the stock market or any index.
Rates, renewal caps, and declared interest rates, will always follow contract provisions relative to minimums and maximums stated. Oceanview determines, at its discretion, the rates, renewal caps and, declared interest rates above the contractual minimums that are guaranteed.