Understanding Annuity Types: Which One Fits Your Life?

Here’s a clear, no-jargon breakdown so you can see which one (or combination) makes sense for you.

1. Single Premium Immediate Annuity (SPIA)

“I want income to start right away — like next month.”

• You hand over a lump sum (e.g., $100,000–$1M+).

• Payments begin within 12 months (often the very next month).

• Highest payout of any annuity type because there’s no growth phase.

• Perfect for: someone retiring now or who just sold a business/home and wants a paycheck immediately.

2. Deferred Income Annuity (DIA) / Longevity Annuity

“I’m healthy and want the biggest possible check later.”

• Buy today (often as young as 50), but income starts years in the future (age 80, 85, etc.).

• Gives you the highest future monthly income because you’re skipping payments for a while.

• Acts like longevity insurance — kicks in exactly when running out of money becomes the real risk.

3. Fixed Annuity (MYGA or Traditional Fixed)

“I want safety and a guaranteed interest rate.”

• Works like a CD issued by an insurance company, but usually with higher rates and tax deferral.

• Rate is locked for 3–10 years (current top rates 5–6%+ as of late 2025).

• At the end, take the cash, roll it, or turn it into lifetime income.

• Perfect parking place for money waiting to go into an immediate annuity later.

4. Fixed Index Annuity (FIA)

“I want growth potential without stock-market risk.”

• Principal is 100% protected — you can never lose money due to market drops.

• Interest is tied to an index (S&P 500, Nasdaq, etc.) with a cap or spread.

• Common crediting in strong years: 6–12% with 0% in down years.

• Great for people who are conservative but tired of 0.01% bank rates.

5. Registered Index-Linked Annuity (RILA)

“I’ll accept some downside risk for higher upside.”

• Offers more growth potential than FIAs (uncapped or higher caps).

• In exchange, you accept limited downside protection (e.g., -10% or -20% buffer in any year).

• For moderately aggressive retirees who still hate big losses.

6. Qualified Longevity Annuity Contract (QLAC)

“I want to lower my Required Minimum Distributions (RMDs) and taxes.”

• Special DIA you can buy inside an IRA or 401(k).

• Let's you defer up to $210,000 (2025 limit) from RMD calculations until age 85.

• Dramatically lowers taxable income in your 70s while creating a guaranteed income later.

7. Variable Annuity

“I want full market upside, and I’m okay with risk.”

• Money is invested in mutual-fund-like subaccounts.

• Value can go up or down with the market.

• Optional lifetime income riders available (for an extra fee).

• Higher long-term growth potential but with real market risk.

8. Hybrid / Income + Growth Annuities

Many modern annuities now combine features:

• Fixed index with a lifetime income rider

• Variable with guaranteed withdrawal benefits

• Immediate annuity with an inflation rider or cash refund