What is a key feature of a fixed annuity?

A fixed annuity is designed to provide a guaranteed rate of return, which is a primary feature that distinguishes it from other types of annuities. This means that when an individual invests in a fixed annuity, they can expect a predetermined and stable interest rate over a specified period. This characteristic is appealing to those who prefer a steady income stream during retirement or want to avoid the volatility associated with investment in the stock market.

The guaranteed return aspect provides a sense of security for policyholders, ensuring that their investment will grow at a consistent rate. It also implies that the funds are generally not exposed to market fluctuations, which can lead to unpredictable results in variable annuities or other investment vehicles.

In contrast, options such as those that offer variable returns based on market performance or invest primarily in high-risk securities do not provide that same level of security and predictability. Additionally, while liquidity can be a benefit in some financial instruments, fixed annuities often come with surrender charges which limit the ease of accessing funds quickly, thus making this option less viable for individuals looking for immediate liquidity.