The difference between fixed and variable annuities determine the cost. These are policies that are generally sold by insurance companies, and many people use them as an investment. There are many types of these policies, and there are benefits that they can provide. Tax shelters are one of the main things that these products have to offer to consumers.
A fixed type of this instrument is very similar to a CD in the way that it manages money. A policy is made amongst an investor and a provider. This is usually good for a set period of time. There is usually an interest rate that is set for the first year, and a minimum amount of returns is guaranteed after that.
Often the first year of these product features an introductory rate, and there is usually a guaranteed minimum rate as well. After this time is up, the insurance company can change the rate to meet market conditions. However, there is usually a set rate that is the minimum, and the return will not fall below this agreed upon value.
Variable accounts are also offered by insurance brokerage firms, and they also allow the money to grow without incurring taxes. The major difference is that these investing tools rely on sub accounts or separate accounts in order to grow the investment.
This type of investment is closer to a 401k, but more money can be invested in this type of account. The rate of return is usually set at a minimum. Money can also grow in these accounts without incurring taxes, and this is one of the chief draws of these particular products.
The difference between variable annuities and fixed annuities is minimal. There are a great many similarities in these products, and they are both a way for an investor to grow their capital without it being taxed. One is more like a CD, while the other functions much like a 401k.
Check out our site to learn all you need to know about fixed annuities, now. You can also find complete details about the many benefits of investing in variable annuities, today.