Annuity guidance in Orland Park.

Fixed, indexed and variable annuities work differently. P. Mark Deimling helps you understand the features and tradeoffs before considering how an annuity may fit your retirement plan. Compare growth, downside risk, liquidity and income below.

Feature	Fixed annuity	Fixed indexed annuity	Variable annuity
How growth works	Insurer credits a stated rate, subject to contract terms and guarantees.	Interest is linked in part to a market index through a contract formula.	Value changes with selected investment options, often mutual-fund-like subaccounts.
Downside exposure	Generally lowest market exposure; guarantees depend on insurer claims-paying ability.	Negative index performance generally does not create negative credited interest in a fixed indexed annuity, but withdrawals, charges and contract terms still matter.	Account value can rise or fall with market performance.
Upside	Usually more limited and predictable.	Potentially higher than a traditional fixed annuity, but caps, participation rates or spreads can limit credited gains.	Greater market participation and greater downside risk.
Liquidity	All annuities are long-term contracts. Surrender charges, tax consequences and withdrawal limits may apply.
Best considered when	Principal stability and predictable crediting are priorities.	A saver wants a balance between some index-linked upside potential and defined downside crediting protection.	A saver accepts market risk in exchange for greater market-based growth potential and values insurance features.

Fixed indexed annuities

Why some retirement savers find the structure compelling.

A fixed indexed annuity can be attractive when the goal is not to maximize every market gain, but to participate in some positive index movement while avoiding negative interest credits solely from an index decline.

Potential interest credits linked to an index
A floor against negative index crediting under a fixed indexed contract
Tax-deferred accumulation
Optional lifetime-income features on some contracts

What you give up in exchange

There is no free protection. Contract formulas can limit upside through caps, participation rates, spreads or other crediting methods. Surrender periods can reduce liquidity. Guarantees depend on the insurer's financial strength and claims-paying ability.

This is why “indexed annuities are superior” is too broad a claim. They can be superior for a specific objective—such as limiting market-loss exposure in a retirement-income bucket—while being inferior for a different objective, such as maximizing long-term equity growth or maintaining unrestricted liquidity.

Questions worth asking

Before purchasing any annuity, understand the contract.

Crediting & returns

How are gains calculated? What are the current caps, participation rates or spreads? Can those terms change?

Fees & surrender

What explicit or implicit costs apply? How long is the surrender period, and what withdrawals are permitted?

Income features

Is there an optional rider? What does it cost, and how is the income base different from cash value?

Issuer strength

All guarantees are subject to the issuing insurance company's financial strength and claims-paying ability.

Want to compare an annuity to the rest of your plan?

Bring the contract—or simply the idea you're considering—and start with the tradeoffs. Explore how an annuity compares with your investment portfolio and fits your retirement income plan.

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