A fixed annuity is a form of the insurance contract that guarantees the customer a particular, set interest rate on their account contributions. A variable annuity, on the other hand, pays the interest that varies depending on the success of an investment portfolio specified by the account’s owner. In retirement planning, fixed annuities are frequently utilized.
A fixed annuity guarantees a minimum rate of interest on your money and you receive a fixed number of payments from the insurance company. A variable annuity allows you to invest your money in different ways (e.g. in different mutual funds) and the payments you receive will depend on how much your investments make.