Why might an investor choose a fixed annuity over a variable annuity?

Choosing a fixed annuity offers investors predictable payments and a guarantee of principal, which means they are not exposed to market risk. This makes fixed annuities appealing to those who prioritize stability and certainty in their retirement income or cash flow planning. Fixed annuities provide a set interest rate for a specific period, guaranteeing the investor a specific amount of money at regular intervals, regardless of market fluctuations. This reliability is particularly beneficial for risk-averse investors seeking a steady income stream without the worries associated with variable returns that come with market investments.

In contrast to this choice, options that emphasize potentially higher returns or investment flexibility do not align with the fundamental characteristics of fixed annuities. Investors looking for opportunities to grow their capital based on market performance would lean more toward variable annuities, which allow investment in stock or other market-related vehicles.