Fixed vs. Variable Annuities: Which Is Right for Your Retirement?

Planning for retirement involves making strategic decisions to ensure financial security in your later years. Among the many options available, annuities stand out as a reliable way to generate income. But choosing between a fixed and variable annuity can be challenging. Understanding their differences and how they align with your retirement goals is key to making the right choice.

Understanding the Basics

You should first familiarize yourself with how these types of annuities work:

• Fixed annuities offer a guaranteed interest rate and predictable income payments. They’re often ideal for those seeking safer investments who prioritize stability and want to avoid market volatility. Once you invest, either through a lump sum or periodic payments, the insurance company guarantees a set return, potentially making budgeting for retirement easier.
• Variable annuities, on the other hand, allow you to invest in subaccounts similar to mutual funds. Your returns, therefore, depend on market performance. While this introduces risk, it also opens the door to potentially higher growth, making variable annuities attractive to those with a longer time horizon or higher risk tolerance.

Matching Annuities to Retirement Goals

Your choice should reflect your financial situation and retirement objectives. If you’re nearing retirement and want a guaranteed source of income, a fixed annuity may be best. It provides peace of mind and protects your principal. Conversely, if you’re younger or have other income sources, a variable annuity could help grow your nest egg through market exposure.

Of course, there’s no reason that you can’t have the best of both worlds. For many investors, a blended approach works well. Consider using fixed annuities for core income and variable annuities for growth. Consulting a qualified professional can help you tailor a strategy that balances risk, return and income needs.

We’re Here to Help

At First Community Insurance & Annuity Center, we’re well-equipped to help those in and around Bourbonnais, IL understand and invest in ideal annuities. Contact us today to discuss your goals, needs and options.

This blog is intended for informational and educational use only. It is not exhaustive and should not be construed as legal advice. Please contact your insurance professional for further information.