They’re Not All The Same

You give a lump sum to an insurance company. They give you a guaranteed income stream, often for life. You’re basically saying, “You take longevity risk. I want certainty.”

• Pro: You can’t outlive the check. That’s huge for people who worry about running out of money at 85, 90, 95+.
• Con: Depending on the payout option, you may be trading away access to that lump sum. In many cases you now “have income,” not “have an account.”
• Reality check: If you die very early and chose “life only,” payments can stop and there may be little or nothing left for your family.

Here you’re focused on: “Can I keep this money safe (or mostly safe), get some growth, maybe create future income later — and do it tax-deferred?”

• Pro: Potential to protect principal while still earning interest or index-linked growth.
• Con: There are rules. Most annuities have surrender periods and penalties if you pull out too much, too soon.
• Tax angle: Growth is tax-deferred until you take it out, just like a traditional IRA or 401(k), and eventually becomes part of Required Minimum Distributions (RMDs).

Today, a lot of retirees do a blend: protect principal first, then turn that protected money into an income stream later when they actually need it. This is where modern riders, fixed index annuities, and smart withdrawal strategies come in.

• Translation: You don’t have to “hand over everything forever” on day one.
• Control: You can often keep an actual account value, not just a promise of checks.
• Spouse planning: Many designs can pay whichever spouse lives longer — not just one life.

Think “tax-deferred CD with an insurance company.” You lock in a guaranteed interest rate for a set period (often 3–10 years). Your principal won’t go down due to markets, and you know your rate in advance.

• Guarantees: The insurer guarantees you won’t lose money and guarantees the interest rate for that term.
• Who likes this: Super conservative savers who want stability without stock market drama.
• Watch for: Surrender period. Pulling out too early can trigger a penalty.

With an FIA, your money is protected from market losses — if the linked index (like the S&P 500®) goes down, you don’t lose your principal or previously credited interest. If the index goes up, you get a slice of that upside (not all of it) based on the contract’s rules.

• Downside protection: Principal is safeguarded even if the stock market falls.
• Upside rules: Growth is limited by a Cap, a Spread, or a Participation Rate. Example: If the index gains 10% and your cap is 8%, you’re credited 8%. Or if the index gains 10% and you have a 2% spread, you net 8%. Or if you have 80% participation and the index gains 10%, you get 8%.
• Fees: Many FIAs have no annual fee unless you add an optional rider (like a guaranteed lifetime income rider).

A VA puts your money into investment subaccounts (basically mutual-fund style portfolios). Your account value can go up or down with the market. There’s no guarantee against loss of principal, unless you pay extra for riders.

• Upside: Full market participation. If markets rip higher, you participate.
• Downside: If markets drop, you can lose value. There is no built-in floor.
• Fees: It’s common to see total fees that land in the ~2% to ~3% per year range, including mortality & expense charges, admin fees, and fund management costs — plus extra rider costs if you add guarantees.