• Your retirement nest egg can have the best potential for safety and growth if you buy an annuity.nest egg image by Jake Hellbach from Fotolia.com
  
  Annuities represent some of the most popular types of retirement investment vehicles. Created and issued by insurance companies, annuities offer features and benefits not found elsewhere. Countless insurance carriers provide annuities, and many carriers have multiple products. The result is an overwhelming and potentially confusing maze wherein you must analyze and decipher contract language, then compare each annuity to similar products available elsewhere. By understanding the three main categories of annuities, you may have an easier time locating a product that best fits your needs, goals and budget.
  
  

Fixed Annuity

• Money deposited into a fixed annuity is guaranteed by the insurance company to never decrease in value. Contributions become part of a larger pool of investor money, with which the insurance company buys fixed income instruments. Funds are often spread between corporate and government bonds, treasury bills, bank CDs, cash and similarly low-risk investment options. Customers have no influence or decision-making capabilities regarding how and where their money is allocated.
  
  

Variable Annuity

• Consumers who deposit their retirement money into a variable annuity enjoy significantly greater control over how and when that money is invested. Variable annuities require the account owner to personally select the investments. Unlike a fixed annuity, a variable annuity's balance is not guaranteed and may decrease in value.
  
  

Indexed Annuity

• Indexed annuities offer consumers the best characteristics of fixed and variable products. Your account balance is tied to, but not actually invested in, a stock market index. The value of that index at the time your policy is purchased becomes your first reference point for determining future values. On your contract anniversary date, if your chosen index value is higher than it was one year ago, your account value will be increased proportionately. However, if your new index value is below last year's reference point, your account balance simply remains the same. Indexed annuities allow investors to participate in stock market increases without exposure to any declines.