Current-rate comparison
Fixed Annuity vs Variable Annuity
A fixed annuity starts with a stated promise. A variable annuity puts money into market subaccounts, so the value can move up or down. This is really a certainty-versus-market-risk decision.
Side-by-side comparison
Where the tradeoffs show up
Rate rows use current figures where they exist; the rest explains the contract and account rules.
| Dimension | Fixed annuity | Variable annuity | What this means | Edge |
|---|---|---|---|---|
Rate or yield Rate + rules | 6.65% guaranteed rate from Atlantic Coast Life as the current annuity rate | Variable annuity returns depend on market subaccounts and are not a fixed APY. | One side quotes a rate. The other takes market risk for possible upside. The annuity figure is current data, not a projection for the non-annuity side. | Depends |
Tax treatment Contract/account rules | Tax-deferred growth until withdrawal in a non-qualified annuity. | Also tax-deferred, but gains are taxed as ordinary income when withdrawn. | Both can defer taxes; the difference is mainly investment risk and fees. | Tie |
Liquidity Contract/account rules | Surrender terms and free-withdrawal rules control access. | Surrender terms can apply, and subaccount values may be down when cash is needed. | Variable annuities add market timing risk to contract liquidity rules. | Fixed annuity |
Principal safety Contract/account rules | Fixed annuities can protect principal under the contract terms. | Principal is not protected unless a rider or guaranteed account option applies. | Fixed annuities usually have the cleaner principal-protection story. | Fixed annuity |
Fees Contract/account rules | Many fixed annuities have no explicit annual account fee, though surrender charges can apply. | Mortality and expense charges, subaccount costs, admin fees, and rider fees can stack up. | Variable annuity fees need close review before accepting market exposure. | Fixed annuity |
Guarantees Contract/account rules | Rate, principal, or income guarantees are contract-defined. | Guarantees usually require optional riders or specific account options. | Variable guarantees can be valuable, but they are rarely free. | Fixed annuity |
Current data read
What the numbers actually say
Today the fixed-annuity rate shown here is the top 5-year MYGA at 6.65%. A variable annuity does not have one comparable guaranteed yield unless a specific rider or guaranteed account option is selected, so the decision is certainty and simplicity versus market participation.
CFA framework
Be clear about what risk you are accepting.
Nikhil Anilkumar Bhauwala, CFA, treats these as certainty-versus-market-risk decisions. The better choice is not always the one with the most upside on paper; it is the one whose downside still works if markets disappoint.
Nikhil Anilkumar Bhauwala, CFA- A fixed annuity starts with a stated promise; a fund or variable annuity starts with market exposure.
- Fees matter more when the outcome is uncertain because they compound in good and bad markets.
- Check liquidity and taxes before leaning on return projections, especially with retirement money.
Plain-English definitions
Fixed annuity
An annuity with contract-defined interest or principal guarantees.
Variable annuity
An annuity where value can vary with investment subaccounts unless specific guarantees apply.
Fixed annuity vs Variable annuity: FAQ
Is a fixed or variable annuity safer?
A fixed annuity is usually safer for principal because the guarantee is built into the contract. A variable annuity can lose value with market subaccounts unless a rider or guaranteed account option applies. The fixed-annuity rate shown here is 6.65%.
Which has higher growth potential?
A variable annuity usually has higher upside because it can participate directly in market investments. The tradeoff is downside risk and higher potential fees.
Which is better for fees?
Fixed annuities are often simpler and lower-fee. Variable annuities can include mortality and expense charges, subaccount expenses, administrative charges, and rider fees.
Turn this into a personal comparison
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