Types of annuities explained: fixed, indexed, immediate and deferred.
Annuities come in four main families. A MYGA grows your money at a declared fixed rate for a set term. A fixed indexed annuity credits interest linked to a market index. A SPIA turns a lump sum into income right away. A DIA or QLAC starts that income years later. All four are insurance contracts, not bank deposits.
Key takeaways
- Every annuity is an insurance contract. Its guarantees are backed by the claims-paying ability of the issuing insurer, not the FDIC.
- The four fixed families protect your principal from market-based losses. They differ mainly in how interest is credited and when income starts.
- A SPIA pays the soonest. A DIA or QLAC pays later, on a date you choose. MYGAs and fixed indexed annuities are savings-stage products first.
- Variable annuities and RILAs are securities that carry market risk. We note them below but do not cover them in depth.
- No single type is "best." The right one, if any, depends on the job you need done. Sometimes the answer is none of them.
When the income arrives, by family
Family 01 · Fixed
What is a MYGA, the multi-year guaranteed annuity?
A MYGA is the simplest annuity: you deposit a lump sum, the insurer declares a fixed interest rate, and that rate is locked in for a set number of years.
Terms commonly run from three to ten years. In shape, a MYGA works a lot like a bank certificate of deposit, which is why so many savers compare the two. The differences matter, though: a MYGA is issued by an insurance company rather than a bank, its growth is tax-deferred rather than taxed each year, and it is not FDIC-insured. We walk through that trade line by line in our annuity vs. CD comparison.
At the end of the term you can usually take the money, renew, or move it to another annuity through a tax-free 1035 exchange. If you are still learning the vocabulary, start with what an annuity is first.
Best for
Savers who want a known, predictable outcome for money they will not need during the term. The closest thing the annuity world has to "set it and forget it."
Watch out
Surrender charges apply if you withdraw more than the contract's free-withdrawal provision during the term. Gains are taxed as ordinary income when withdrawn, and a 10% federal penalty may apply before 59½.
Guarantee note
The declared rate and your principal are backed by the claims-paying ability of the issuing insurer. Not FDIC-insured, not bank-guaranteed.
Family 02 · Fixed indexed
What is a fixed indexed annuity, and how does index crediting work?
A fixed indexed annuity (FIA) credits interest based on the movement of a market index. Your money is never invested directly in the market.
In a year the index falls, your credited interest has a floor, typically 0%, so the drop does not reduce your principal. In a year the index rises, your credit is limited by caps, participation rates, or spreads that the insurer sets and can change at renewal. That is the trade in one sentence: you give up part of the good years to avoid the bad ones.
Many FIAs offer optional income riders that can turn the account into a lifetime paycheck later, for an ongoing fee. That rider decision is its own topic, covered in our guide to guaranteed lifetime income. And if you have heard a similar "index with a floor" pitch attached to life insurance, that is a different product with different rules; see IUL, explained honestly.
Best for
Savers who want more growth potential than a declared-rate product, still with protection from market-based losses, and who plan to leave the money alone for years.
Watch out
This is the most complex fixed family. Caps and participation rates can change, rider fees are deducted even in a 0% credit year so cash value can decline, and surrender schedules are often long. Never buy one on a best-case illustration.
Guarantee note
The 0% floor and any rider guarantees are backed by the claims-paying ability of the issuing insurer. Not FDIC-insured, not bank-guaranteed.
Family 03 · Immediate income
What is a SPIA, and when does the income start?
A single premium immediate annuity (SPIA) is the original pension-style product: you hand the insurer a lump sum, and payments begin quickly, usually within a year.
You choose the shape of the payments before they start. A single-life option pays as long as you live. A joint option keeps paying a surviving spouse. Period-certain and cash-refund options make sure your family receives at least a set amount if you die early. Each protection you add lowers the payment, so the choice is a real decision, not paperwork.
The honest framing: a SPIA is not a growth product. It is a way to convert part of your savings into a dependable floor of income for essentials, so the rest of your money can stay invested for the long run. Whether that floor is worth building is exactly the question in is an annuity right for me.
Best for
Retirees who need a paycheck now, especially to cover the gap between fixed monthly expenses and Social Security.
Watch out
The decision is generally irreversible. Once payments begin you give up access to the lump sum, and a level payment buys a little less each year as prices rise unless you add an increasing-payment option.
Guarantee note
Every payment, including lifetime payments, is backed by the claims-paying ability of the issuing insurer. Not FDIC-insured, not bank-guaranteed.
Family 04 · Deferred income
What are DIAs and QLACs, the annuities that start paying later?
A deferred income annuity (DIA) is a SPIA with a delay: you buy it now, and the income starts on a future date you choose, sometimes decades away.
Because the insurer holds your money longer before paying, and because not every buyer lives to collect for long, the eventual payments are larger for each dollar committed than an immediate annuity bought at the same age. That makes the DIA the purest form of longevity insurance: protection against the specific risk of living to 92 with the savings of an 82-year-old.
A QLAC, or qualified longevity annuity contract, is a DIA bought inside an IRA or workplace retirement plan with special tax treatment. Federal law caps QLAC purchases at $210,000 in 2026 (a statutory limit, indexed over time), and lets the income start as late as age 85. Money in a QLAC is excluded from the balance used to calculate required minimum distributions until income begins, which can lower your RMDs in your 70s. How that interacts with your bracket is part of the bigger retirement tax picture.
Best for
People worried about outliving their money in late retirement, and IRA owners who want smaller required withdrawals early on in exchange for dependable income later.
Watch out
The wait is the cost. Your money is committed years before the first check, inflation runs during the deferral, and if you die early the outcome depends entirely on whether you chose a life-only option or added a refund or period-certain feature.
Guarantee note
Future income promised today is backed by the claims-paying ability of the issuing insurer over the whole deferral period. Not FDIC-insured, not bank-guaranteed. Insurer financial strength matters most in this family.
The other branch · Not covered here
What about variable annuities and RILAs?
Two more types exist, and honesty requires naming them: variable annuities and registered index-linked annuities (RILAs). Both put your principal at market risk, and both are securities regulated by the SEC and FINRA, sold by prospectus.
A variable annuity invests your money in market subaccounts, so the value rises and falls with the market. A RILA links to an index with a buffer or partial floor, but losses beyond that protection are yours. Fees can stack in layers, and the moving parts multiply quickly. None of that makes them bad products; it makes them a different category with a different rulebook, and outside the education-first, fixed-product scope of this site.
How do the annuity families compare?
Side by side, in words rather than numbers. More dots means more of that quality. This is a relative guide within the table, not a score, and never a substitute for reading an actual contract.
| Family | Principal protection | Growth potential | Income timing | Access to your money | Complexity |
|---|---|---|---|---|---|
| MYGAMulti-year guaranteed annuity | Strong, insurer-backed | Steady, declared in advance | Optional, later | Limited; free-withdrawal provisions vary | Low |
| Fixed indexed (FIA)Index-linked crediting | Strong, insurer-backed | Index-linked, capped | Optional, later; often via a rider | Limited; longer surrender schedules common | Higher |
| SPIAImmediate income | Converted to income, insurer-backed | Not the job; it pays, it does not grow | Within about a year | Generally none once payments begin | Low |
| DIA / QLACDeferred income | Converted to future income, insurer-backed | Not the job; larger later payments instead | A future date you pick; QLAC as late as 85 | Generally none before income starts | Moderate |
| Variable / RILASecurities; not covered here | Market risk; losses possible | Higher potential, with losses possible | Varies by contract | Limited; surrender charges common | Highest |
All guarantees in the fixed families are subject to the claims-paying ability of the issuing insurer and are not FDIC-insured or bank-guaranteed. Annuities are long-term products; surrender charges may apply, and withdrawals before 59½ may incur a 10% federal penalty. Growth inside a deferred annuity is tax-deferred, not tax-free.
When you're ready · not before
Not sure which family fits the job?
That is a normal place to land after this page. The type only matters once you know what you need the money to do: grow quietly, pay now, or pay later. A complimentary meeting with an independent, fiduciary-minded advisor can map that, with no products, no rates, and no pressure. And if no annuity fits, that is exactly what you will hear.
Book a complimentary meetingComplimentary · No obligation · The advisor is independent and licensed.
Before any meeting, read these two
- Is an annuity right for me? A 5-question self-check
- Guaranteed lifetime income, and its fine print
- Then bring your questions. Skepticism is welcome.
Keep reading, in the order that helps most.
What Is an Annuity?
The plain-English starting point: what the contract is, what it is not, and the vocabulary you need.
Read the guide → 02Guaranteed Lifetime Income
How "create your own pension" works, income riders, and the fine print that matters.
Read the guide → 03Annuity vs. CD
An honest side-by-side on safety, growth, taxes, access, and what each really trades away.
Read the guide → 04Indexed Universal Life (IUL)
The tax-free-retirement claim, honestly: the real benefits and the real caveats.
Read the guide → 05The Retirement Tax Picture
Tax-deferral, RMDs, the tax torpedo, and the three-bucket way to think about it.
Read the guide → 06Is It Right for Me?
Who these products suit and, just as important, who should walk away.
Read the guide →Straight answers
Common questions about annuity types.
What is the safest type of annuity?
What is the difference between a fixed annuity and a fixed indexed annuity?
Can you lose money in a fixed or fixed indexed annuity?
Do all annuities pay income for life?
Sources
- FINRA, "Annuities." finra.org/investors/investing/investment-products/annuities
- U.S. Securities and Exchange Commission, Investor.gov, "Annuities." investor.gov/.../insurance-products/annuities
- U.S. Securities and Exchange Commission, "Updated Investor Bulletin: Indexed Annuities." sec.gov/oiea/investor-alerts-and-bulletins/ib_indexedannuities
- Internal Revenue Service, Publication 575, "Pension and Annuity Income." irs.gov/publications/p575
- Internal Revenue Service, "Retirement topics: Required minimum distributions (RMDs)." irs.gov/retirement-plans/.../retirement-topics-required-minimum-distributions
- National Association of Insurance Commissioners, "Annuities" consumer guide. content.naic.org/consumer/annuities.htm
- U.S. Securities and Exchange Commission, Investor.gov, "Variable Annuities." investor.gov/.../insurance-products/variable-annuities
Statutory figures such as the QLAC purchase limit are as of 2026 and indexed over time; confirm current limits at irs.gov before acting.