What type of annuity provides a guaranteed rate of return?

A fixed annuity is designed to provide a guaranteed rate of return, making it a secure investment option for individuals seeking stability and predictability in their retirement planning. With a fixed annuity, the insurance company credits the account with a predetermined interest rate, which remains consistent over time. This creates a reliable income stream for the annuitant, especially beneficial for those who prefer not to take on the risks associated with market fluctuations.

In contrast, a variable annuity allows for investment in various funds, which can lead to variable returns dependent on the performance of those investments. An indexed annuity links returns to a specific market index, providing potential for growth while offering some downside protection but not a guaranteed rate. Lastly, an immediate annuity begins payout as soon as the contract is established, but it can be either fixed or variable depending on the terms agreed upon.

Therefore, choosing a fixed annuity means opting for guaranteed returns, offering financial peace of mind to individuals planning for their future.