Fixed vs. Fixed Indexed Annuity: What's the Difference?

The short answerA fixed annuity credits a declared interest rate for a set period, so you know your rate up front. A fixed indexed annuity credits interest based partly on a market index, limited by caps or participation rates, with a floor (often 0%) so index drops don't reduce your credited value. Neither is a direct market investment, and both usually have surrender charges.

Side by side

Rate: fixed is declared in advance; indexed depends on index performance, within limits.
Upside: fixed is predictable; indexed may credit more in strong years, up to the cap.
Downside: both shield your credited value from market drops; indexed may credit 0% in a down year.
Complexity: fixed is simple; indexed has more moving parts (caps, spreads, participation rates, crediting methods).

Caps and participation rates can change

Insurers can usually reset caps and rates at renewal, within the minimums written in the contract. Ask what those contract minimums are, not just today's rates.

Which fits?

If you want simplicity and a known rate, fixed. If you're comfortable with some variability for the chance of higher credits, indexed may fit. Try hypothetical numbers in the free projector first.

See hypothetical growth numbers

Our free projector shows how savings could grow under example rates. Hypothetical only, not a quote or a promise of future results.

Open the annuity projector

Related free tools

Family needs analysisAdd up debt, income, mortgage and education to get your own coverage number.FAST calculatorSee where money leaks each month and what you could redirect toward protecting your family.Mortgage coverage calculatorStart with your loan balance and monthly payment.

Common follow-up questions

Is an indexed annuity invested in the stock market?

No. Interest is calculated using an index, but your money isn't invested in it.

What's a participation rate?

The percentage of the index gain used to calculate interest, such as 50% of the gain, sometimes combined with a cap.

Do indexed annuities have fees?

The base contract may not have an annual fee, but optional riders usually do, and surrender charges apply.

How long do surrender charges last?

Commonly several years, declining over time. It varies by contract.

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Fixed vs. fixed indexed annuity: what's the difference?