Thursday, August 4, 2016
Fixed Annuities vs. Variable Annuities
Aegis Capital Corp. is a retail and institutional broker-dealer located in New York City. As part of its commitment to its clients, Aegis Capital Corp. advises individual investors on fixed and variable annuities.
At the most basic level, an annuity refers to payments submitted to an insurance company in exchange for future income streams during retirement. Fixed annuities involve guaranteed minimum interest rates, which can vary but never fall below a specified lower threshold. As such, fixed annuities provide relatively stable income streams. Payments on fixed annuities can be submitted in one lump sum or spread out over an established period of time.
By contrast, variable annuities allow the policyholder to determine how the insurance company invests premiums. Policyholders typically choose from a set of investment options consisting of professionally managed portfolios. While fixed annuities provide returns based on a constant rate of return, returns from variable annuities depend on the performance on the investment subaccounts. For this reason, variable annuities feature an inherently higher risk profile.