The Pros & Cons of Fixed Vs. Variable Annuities

When you’re looking to secure some funds as you transition into retirement or as another stream of income, it’s important to know the different options available to you. Annuities are a good way to earn some steady income when you’re ready to put your working days behind, but you quickly learn that you’re faced with even more options. 

Should you get a fixed annuity or a variable annuity? What are fixed vs. variable annuity pros and cons? Do you want one that is immediate or deferred? With the help of a certified and trusted financial professional, it can be easier to make these determinations on your own. 

In this article, we’ll break down the difference between the four main types of annuities (variable, fixed, deferred, and immediate), and determine some of the pros and cons of choosing a fixed annuity versus a variable annuity. In the end, hopefully, you’re equipped to navigate your financial future with clarity and resolve. 

Fixed Vs. Variable  

Below we break down the different types of common annuities

  1. Fixed annuities: Its name might give you a hint, but a fixed annuity provides a guaranteed income as an annual minimum, which ensures you at least get a foundational amount of money each year. No matter the market, you get your guaranteed minimum amount. 
  2. Variable annuities: Contrary to fixed annuities, variable annuities are not guaranteed. In fact, in variable annuities, your investments depend on market performance and are overall riskier than in fixed annuities. With help, you’ll choose investments, like mutual funds, and hope they perform well. It’s a gamble, but it could pay off more than fixed annuities. 

Your annuities can also be immediate or deferred. Immediate annuities are exactly like they sound: you begin to receive your payments within a year of your annuity purchase. Deferred annuities, on the other hand, are put off for over a year or longer before you begin collecting payments. 

Pros & Cons of a Fixed Annuity 

There are several pros and cons to all types of annuities. Below is a breakdown of the two for fixed annuities. 


  1. Guaranteed income: You receive your money no matter how the market performs. 
  2. Less risk: You’re definitely getting your payments after purchase. 
  3. Safe and reliable: You can always count on it. 


  1. Low reward: You won’t make as much as a variable annuity that hits a home run. 
  2. Less flexibility: You’re locked into your annuity contract unless it’s set up to change in the contract’s future. 
  3. No inflation protection: Your money won’t grow as inflation grows. 

Pros & Cons of a Variable Annuity 

The pros and cons of variable annuities are as follows: 


  1. Chance of making more: If the markets you invest in perform well, you could make lots of money. 
  2. Inflation flexibility: Because both inflation and variable annuity investments can grow significantly, you can keep up with the rising cost of living. 
  3. Flexibility: You retain control over what markets you invest in and can invest in several different areas. 


  1. More risk: If the markets don’t perform well, you don’t make money. 
  2. Less stability: Compared to fixed annuities, your stability depends on the markets you invest in. 
  3. Overall cost: These are generally more expensive than fixed annuities, especially if you have to take damage from failing markets. 


Annuities can be a reliable and sustainable source of income if you know how to choose them. Make sure you educate yourself on the complexities of both fixed and variable annuities beyond the surface-level arguments listed in this article. 

But overall, if you want low risk and stability, go for a fixed annuity. If you want a higher potential reward and think it’s worth rolling the dice, choose a variable annuity. Make sure you use the wisdom of professional annuity experts before making your choice.