There are five main types of annuities, and the differences between them matter more than most people realize. Some are simple. Some are expensive. Some do exactly what retirees need, and some are built more for the companies selling them.
We're going to walk through all of them honestly. We sell one of them, the single premium immediate annuity (SPIA), so yes, we have a bias. But we'll explain each type fairly and let you see why we landed where we did.
The Quick Overview
| Type | How It Works | Fees | Risk | Best For |
|---|---|---|---|---|
| Immediate (SPIA) | Lump sum in, monthly income out — starts within 30 days | None | None | Retirees who need income now |
| Fixed (MYGA) | Guaranteed interest rate for a set term, like a CD | None | None | Safe growth before retirement |
| Deferred Income (DIA) | Pay now, income starts at a future date you pick | None | None | Planning income 5–20 years out |
| Fixed Indexed (FIA) | Returns linked to a market index, with a floor and a cap | Low–Moderate | Low | People who want some upside without downside |
| Variable | Invested in market subaccounts (mutual funds) | High (2–3%+) | High | Long-horizon investors comfortable with loss |
Now let's go deeper on each.
Immediate Annuities (SPIA)
This is the type we specialize in, and it's the oldest form of annuity — the concept dates back to the Roman Empire.
A Single Premium Immediate Annuity converts a lump sum into guaranteed monthly income that starts right away. You hand Pacific Life or New York Life $100,000, and within 30 days, a payment hits your bank account. Then another one the next month. And the next. For the rest of your life.
No accumulation phase. No investment decisions. No annual fees.
In our October 2026 rate tables, a 65-year-old man investing $100,000 gets $573 to $693 per month depending on which of the 8 carriers we publish he picks (single life, 5-year period certain). A 70-year-old gets more, $654 to $767, because the insurance company expects to make fewer payments. Current rates are here.
Source: LifeAnnuities.us quote surveys run for real clients. 54 base survey runs received and 52 used for pricing (July 14 to September 14, 2026), checked against 7 new survey runs (September 18 to 29, 2026): 1 of 8 published carriers repriced, 7 held. Joint figures at ages 65 and 70 are calibrated to a direct same-age joint quote. Single life or joint (100% to survivor), 5-year period certain, per $100,000. How we build these figures.
The SPIA is the most efficient way to convert savings into lifetime income. We've never found a product that does it better.
Fixed Annuities (MYGA)
A Multi-Year Guaranteed Annuity is the annuity world's answer to a bank CD. You deposit a lump sum, the carrier guarantees a fixed interest rate for 3 to 10 years, and your money grows tax-deferred.
MYGA rates move with bond yields and vary by term; we do not quote them.
The difference between a MYGA and a bank CD: tax deferral. You don't pay taxes on the interest until you withdraw it. For someone in a higher tax bracket, that deferral is valuable.
MYGAs don't produce income by themselves — they're accumulation products. But many of our clients use them as a holding pen: park money in a MYGA for a few years, then roll it into a SPIA when they're ready for income. Clean, simple, no fees.
Deferred Income Annuities (DIA)
Think of a DIA as a SPIA with a delayed start date. You pay your premium today, but income doesn't begin until a date you choose — 2 years from now, 10 years, even 20.
The longer you defer, the higher the eventual payment. Because the carrier holds and invests your money longer, they can pay you significantly more per month when income finally starts.
A specific version of this is the QLAC — a Qualified Longevity Annuity Contract. You can move up to $200,000 from your IRA into a QLAC, and that money is excluded from required minimum distribution (RMD) calculations. For people who don't need all their IRA money right away, this is a legitimate tax planning tool.
DIAs are solid products. We recommend them for clients in their late 50s who want to lock in guaranteed income starting at 65 or 70.
Fixed Indexed Annuities (FIA)
This is where things get more complicated.
A fixed indexed annuity links your returns to a market index — usually the S&P 500. But you don't actually invest in the index. Instead, the carrier uses options strategies to credit you a portion of the index's gains, subject to a cap (maximum return) and a floor (minimum return, typically 0%).
So if the S&P 500 returns 18% in a year and your cap is 8%, you earn 8%. If the S&P drops 25%, you earn 0% — but you don't lose anything.
Sounds appealing in theory. In practice, the caps, participation rates, and spread fees make these products hard to evaluate. The carrier can change the cap annually, and the marketing materials often highlight best-case scenarios that rarely play out.
FIAs aren't bad products. Carriers like Allianz, Nationwide, and Athene offer well-designed ones. But they're accumulation vehicles, not income products. And for pure retirement income, a SPIA is simpler and more transparent.
Variable Annuities
Look, we'll give variable annuities a fair hearing. They invest your premium in market subaccounts — essentially mutual funds. If the market does well, your balance grows. If it doesn't, your balance shrinks.
The appeal is growth potential with tax-deferred treatment.
The problem is cost. The average variable annuity charges 2–3% in annual fees, broken down across mortality and expense charges, administrative fees, fund expenses, and optional rider fees. On $200,000, that's $4,000 to $6,000 per year — every year — whether the market goes up or down.
And here's what actually happens in the industry: variable annuities pay advisors 5–7% commissions upfront, compared to 1–3% for fixed annuities. That commission structure is a big reason variable annuities get recommended as often as they do.
If you want market exposure, buy an index fund for 0.03% per year. Don't wrap it in an insurance product that charges 80 times that. For our complete take, read our fixed vs variable annuity comparison.
A Side-by-Side Fee Comparison
Fees are the detail most people overlook. Here's what each type actually costs you on a $100,000 annuity held for 10 years:
| Type | Annual Fee | Total Fees Over 10 Years | Guaranteed Income? |
|---|---|---|---|
| SPIA | $0 | $0 | Yes — for life |
| MYGA | $0 | $0 | No (growth product) |
| DIA | $0 | $0 | Yes — starting at future date |
| FIA | 0–1.0% | $0–$10,000 | Only with income rider (extra fee) |
| Variable | 2.5–3.5% | $25,000–$45,000 | Only with income rider (extra fee) |
That variable annuity column is not a typo. On $100,000, you could pay $25,000 to $45,000 in fees over a decade. And you still have market risk on top of that.
How to Think About the Decision
The annuity industry has created a lot of product complexity over the past 30 years. Some of that complexity serves consumers. A lot of it serves the companies and advisors who profit from it.
Here's how we think about it with our clients:
If you need income now — you're retired, you need a monthly check — get a SPIA. Nothing else is as direct, as simple, or as cost-efficient for converting savings into guaranteed lifetime income.
If you need income in 5 to 15 years: park the money somewhere safe and buy the SPIA when the income should start. Payout rates rise every year you wait, and you keep control of the money until then.
If you want safe growth first, a MYGA or CD can hold the money, but neither produces lifetime income. When you are ready for the check, that money buys a SPIA, and payout rates rise with age while you wait.
If you want market-linked growth with some protection — a fixed indexed annuity can work, but understand the caps and read the fine print carefully.
If someone recommends a variable annuity — ask them to disclose their commission, explain all the fees in writing, and show you what the net return looks like after costs. Then compare that to a SPIA or a low-cost index fund.
Questions We Hear All the Time
Can I own more than one type of annuity?
Absolutely. Many of our clients have a SPIA for current income and a MYGA or DIA for future needs. There's no rule against it, and splitting your money across products — and carriers — can actually be smart diversification.
Which types of annuities have the lowest fees?
SPIAs, MYGAs, and DIAs all have zero annual fees. The carrier's costs are built into the rate they offer you. Fixed indexed annuities have low-to-moderate fees, especially if you skip optional riders. Variable annuities are the most expensive by a wide margin — 2–3.5% per year in total costs.
Can I switch from one type to another?
Yes, through a 1035 exchange. This lets you transfer funds from one annuity to another without triggering taxes. Check your current surrender charges first — you may face a penalty if you're still within the surrender period. We help clients do these exchanges regularly.
Our Recommendation
For most retirees, the fixed life annuity — the SPIA — is the right answer. It does one thing perfectly: guaranteed monthly income for life. No fees eating into your return. No market risk keeping you up at night. No 200-page contract you need a lawyer to understand.
The other types exist for specific situations, and some are genuinely useful. But if your primary goal is retirement income you can count on, start with the simplest tool that solves the problem.
See what a SPIA pays on your amount, or request a free quote from our team. Our surveys quote 17 carriers, and we publish the 8 rated A or better by AM Best that quoted in nearly every survey, so you can see how far apart they sit. Call us at 800-747-4201 if you prefer to talk it through.
