Types of Annuities Explained — FIA, VA, MYGA, SPIA, RILA

By Editorial Team

Published January 1, 2024 · Updated May 5, 2026

“Annuity” is one of the most abused words in financial services. The same label covers products that behave almost nothing alike — a CD-equivalent with no market exposure, a vehicle with direct stock-market risk, a guaranteed pension substitute, and a hybrid that combines features of all four. Before evaluating any specific product, it helps to understand the full landscape.

Immediate vs. Deferred: The Foundational Split

Every annuity is either immediate or deferred. This is the most basic structural distinction and it determines whether you are exchanging a lump sum for income now, or accumulating value for later.

An immediate annuity converts a premium into an income stream that begins within 12 months of issue. The most common form is a Single Premium Immediate Annuity (SPIA). You give the carrier a lump sum; they send you a check every month for life, for a set period, or both. Variations include Qualified Longevity Annuity Contracts (QLACs), which allow you to defer RMDs on a portion of qualified assets until age 85.

A deferred annuity has an accumulation phase first. You deposit a premium, it grows inside the contract under the applicable crediting method, and the income phase — if it ever occurs — comes later. MYGAs, FIAs, Variable Annuities, and RILAs are all deferred products. The accumulation phase can last anywhere from 3 to 30 years. During this period, any growth is tax-deferred in non-qualified accounts.

The time-value difference matters: a deferred product’s value comes partly from compounding during the accumulation phase, while an immediate product’s value is entirely in the income stream it generates. They serve different planning purposes and should not be compared on the same axis.

Fixed Annuities (MYGA / FA): Guaranteed Rate, No Market Exposure

A Multi-Year Guaranteed Annuity (MYGA) is the most straightforward deferred annuity. You deposit a single premium, the carrier credits a guaranteed fixed rate for the entire surrender period (typically 3 to 10 years), and your account value grows predictably. There is no index, no cap, no participation rate. The rate is declared at issue and does not change until the surrender period ends.

“Fixed Annuity” (FA) is the broader category that includes MYGAs as well as products where the rate can be reset annually — similar in concept to a bank savings account, though with a contractual minimum floor. MYGAs are the sub-category with a locked rate for a fixed multi-year term.

Principal protection is real: your account value does not decline due to market performance. FDIC-equivalent coverage does not exist, however. Annuities are insurance products backed by the issuing carrier’s general account and, as a secondary backstop, by state guaranty associations. Most states provide $250,000 in coverage per carrier, though limits vary. This is meaningfully different from a bank deposit but is real protection in most reasonable insolvency scenarios.

Surrender schedules typically run 3 to 10 years and impose a penalty on full withdrawal before the period ends. Most contracts allow a 10% free withdrawal per year without penalty. After the surrender period, the contract typically renews at a new declared rate, at which point you can surrender without penalty and move funds elsewhere.

Comparison to alternatives: a MYGA competes most directly with CDs and intermediate Treasuries. The rate is often higher than both (partly because of the surrender period commitment and partly because annuity income from non-qualified accounts is partially return of principal rather than fully taxable interest). The tax deferral during accumulation is an additional advantage in taxable accounts.

Fixed Indexed Annuities (FIA): Index-Linked with a 0% Floor

A Fixed Indexed Annuity is a deferred product that credits interest based on the performance of an external index — typically the S&P 500 Price Return index, though dozens of alternatives exist. The key mechanics:

No direct market participation. You do not own shares of any index. Your money sits in the carrier’s general account, invested primarily in bonds. The carrier uses a portion of the interest earned on that bond portfolio to purchase call options on the chosen index. If the index rises, the options produce a gain, which the carrier credits to your contract subject to the cap, spread, or participation rate. If the index falls, the options expire worthless and you receive nothing — but you also lose nothing already credited. Prior gains are locked in (the “annual reset” feature).

Crediting methods: The carrier applies one of three structures. A cap rate sets the maximum credit (e.g., you receive up to 9% no matter how high the index goes). A participation rate lets you receive a fixed percentage of the index gain with no ceiling (e.g., 60% of whatever the index returns). A spread deducts a fixed percentage from the index gain (e.g., index gains 12%, carrier deducts 3%, you receive 9%). Most FIAs offer all three on different indexes within the same contract.

The floor is typically 0%. Credited interest cannot go below zero in a given contract year. You can have a flat year — which feels like a loss when compared to what you could have earned elsewhere — but you will not see your account value drop due to index performance. This is the core value proposition of an FIA.

This is the product type that RankMyAnnuity focuses on, and the Index Performance Calculator on this site was built specifically to model FIA crediting strategies across 64 indexed options.

Variable Annuities (VA): Direct Market Exposure, Full Risk

A Variable Annuity is fundamentally different from a fixed or fixed-indexed product. In a VA, your premium is allocated to subaccounts — which are essentially mutual funds held inside the annuity wrapper. Your account value rises and falls with actual market performance. You can lose principal. There is no floor unless a rider provides one.

Because subaccounts carry market risk, VAs are regulated as securities in addition to being regulated as insurance. They fall under both state insurance oversight and FINRA supervision. The agent selling them must hold a securities license in addition to a life insurance license.

VAs typically carry Mortality and Expense (M&E) fees, investment management fees on each subaccount, and optional rider fees. Total annual costs of 2% to 3% or more are common. Most VAs also offer optional Guaranteed Living Benefit (GLB) riders — including Guaranteed Lifetime Withdrawal Benefits (GLWBs) and Guaranteed Minimum Income Benefits (GMIBs) — that provide income floor protections in exchange for additional fees.

VAs sold before the 2000s often had more generous benefits than current products. Many people who hold older VA contracts with rich guaranteed benefit bases should evaluate them carefully before surrendering — even if the current product appears expensive.

Registered Index-Linked Annuities (RILA): Buffered Upside, Partial Downside Risk

A Registered Index-Linked Annuity (RILA) — also called a “buffered annuity” — sits between a Fixed Indexed Annuity and a Variable Annuity. Like an FIA, it credits returns based on an index rather than direct subaccount ownership. But unlike an FIA, a RILA does not guarantee a 0% floor. Instead, it offers a buffer or a floor.

A buffer absorbs the first X% of loss. If the buffer is 10% and the index falls 15%, you absorb only the last 5% — the carrier absorbs the first 10%. A floor caps your maximum loss at a stated percentage regardless of how far the index falls.

In exchange for taking on some downside risk, you receive higher participation in the index’s upside — higher caps or higher participation rates than a comparable FIA. RILAs are securities and require a securities license to sell, similar to VAs.

RILAs are appropriate for buyers who are comfortable with some principal risk in exchange for more upside participation, and who understand they can lose money in severe market downturns. They are not principal-protected in the way that FIAs are.

How Carriers Blur the Lines

In practice, the product categories above are not hermetically sealed. Consider a common structure: an FIA with a Guaranteed Lifetime Withdrawal Benefit (GLWB) rider, several index crediting options, and a fixed account allocation.

This single product has: FIA mechanics for the accumulation value (index-linked, 0% floor, annual reset); income annuity economics through the GLWB, which guarantees a minimum withdrawal percentage of a separate “income benefit base” for life, regardless of what happens to the actual account value; and MYGA-like features via the fixed account option inside the same contract.

Some carriers also offer hybrid FIAs with buffer allocations — meaning one allocation option within the contract has limited downside exposure in exchange for higher upside, bringing RILA mechanics into an otherwise FIA structure.

The underlying legal and tax structure — a deferred annuity contract issued by a life insurance company — is common to all of these. “Annuity” is more accurately understood as a legal wrapper than as a product description. What differs is the crediting mechanics inside the wrapper.

Comparison: Key Differences at a Glance

Type	Principal Risk?	Return Source	Securities License?	Income Riders Available?
SPIA / QUIA	No (once annuitized)	Carrier mortality / interest	No	N/A — is the income stream
MYGA / FA	No	Declared fixed rate	No	Rarely
FIA	No (0% floor)	Index-linked, capped upside	No	Yes — GLWB, GMIB
RILA	Partial (buffer/floor)	Index-linked, buffered downside	Yes	Some products
Variable Annuity	Yes (full market risk)	Subaccount market returns	Yes	Yes — GLWB, GMIB, GMAB

”Annuity” as a Legal Structure, Not a Product Category

It is worth stepping back to note that “annuity” technically describes a legal structure under state insurance law — not a product behavior. The shared features of all annuities are: they are contracts issued by life insurance companies, they offer tax-deferred growth in non-qualified accounts, they provide a death benefit (at minimum, return of premium or account value), and they have the ability to convert to a stream of income payments.

Everything else — how interest is credited, whether principal is at risk, what fees apply, whether riders are available — varies enormously between product types. This is why the category label alone tells you almost nothing useful about whether a specific annuity is a good fit for your situation.

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