A fixed annuity is an insurance contract that provides predictable, guaranteed returns during the accumulation phase and stable income payments during the payout phase. Unlike investments tied to the stock market, a fixed annuity offers certainty—you know exactly how much interest your money will earn and exactly how much income you'll receive.

During the accumulation period, the insurance company guarantees a specific interest rate for your contributions, similar to how a CD works but often with a longer time horizon. When you're ready to receive income, you can convert your accumulated value into a stream of fixed payments that won't change regardless of what's happening in the markets or economy. This stability makes fixed annuities particularly appealing to people who prioritize security over growth potential and want to protect a portion of their retirement savings from market volatility.

The security of a fixed annuity comes with some trade-offs. The guaranteed returns are typically modest compared to what you might earn in the stock market during good years, and the fixed payments won't increase with inflation unless you specifically purchase an inflation-adjusted option. Additionally, accessing your money early usually triggers surrender charges. Fixed annuities work best as part of a diversified retirement strategy where they provide a stable foundation while other investments pursue growth.