What defines a fixed annuity?

A fixed annuity is characterized by its provision of fixed payments to the annuitant over a specified period or for the remainder of their life. This means that once the annuity is purchased and the contract is in effect, the payments received do not fluctuate based on market conditions or other factors. Additionally, fixed annuities typically guarantee a minimum interest rate on the funds invested, which protects the annuitant's principal from market volatility and ensures a reliable stream of income.

This stability and predictability are key features that differentiate fixed annuities from other types like variable annuities, which can have payments that vary based on the performance of underlying investments. The guarantee of fixed payments and a minimum interest rate provides a sense of security and allows individuals to plan their financial future with lower risk.