The Difference Between Indexed and Variable Annuities
The Annuity Man
The two most popular annuity types that are sold in the United States are Variable Annuities (VAs) and Fixed Index Annuities (FIAs). Both are high commission products that agents love to push as one size fits all solutions. However, comparing VAs and FIAs is like comparing apples and oranges.
Variable Annuities (VAs) are classified as a security. They are regulated by FINRA and the SEC, just like stocks, mutual funds, ETFs, etc. Fixed Index Annuities (FIAs) are fixed annuities and life insurance products that are regulated at the state level. The only similarity is that they are both issued by life insurance companies.
Even though the mutual fund (aka: separate account) choices are limited with Variable Annuities (VAs), they are the only annuity type that could potentially produce market returns. Those returns are limited by high annual fees (for the life of the policy) as well.
Fixed Index Annuities (FIAs) were introduced in 1995 to produce CD type (or a little better) returns. Since inception, that's exactly what they have done...even though agents pitch them as market return products. They are not.
Both VAs and FIAs can have Income Riders attached to most policies at the time of application to provide a future pension income stream if needed.
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