A fixed indexed annuity (FIA) is a contract between you and an insurance company. FIAs offer the opportunity for tax deferral and interest credits, based in part on changes in a market index, plus the option to convert your annuity into a steady, guaranteed, lifetime income stream, all while protecting your hard-earned principal from the uncertainty of market loss.

When purchasing an FIA, you agree to pay for it in either a single lump sum or multiple payments over time. In return, the insurance company takes the risk of market downturns to protect your annuity value and also promises to make payments from the annuity to you in a single payment or series of payments, over a fixed number of years.

Money in an FIA can earn interest based on positive changes to the index. Annual interest is typically calculated annually using a unique formula based on changes in the performance of an external market index (S&P, Dow Jones, NASDAQ). You are never invested in the markets, and can’t lose money due to market loss.

A multi-year guaranteed annuity, or MYGA, is a type of fixed annuity that offers a guaranteed fixed interest rate for a certain period, usually from three to 10 years. A MYGA may be appropriate for someone who is closer to retirement, and/or prefers tax deferral and a guaranteed interest rate.

Buying a MYGA can be one strategy for generating added income in retirement to supplement investment accounts and Social Security benefits.

MYGAs offer a conservative way to grow your money, and you won’t owe taxes on the growth until you start taking payments.

A SPIA is a contract between you and an insurance company designed for income purposes only. Unlike a deferred annuity, an immediate annuity skips the accumulation phase and begins paying out income either immediately or within a year after you have purchased it with a single, lump-sum payment. SPIAs are also called immediate payment annuities, income annuities and immediate annuities.

This annuity is the oldest type, dating back to the ancient Roman Empire. The word annuity actually comes from the Latin, annua, which means annual payments. Roman soldiers received lifetime annuity payments to compensate for their service in the military.

Some consider it to be the simplest and most consumer friendly annuity. But it represents only a small portion — about 10 percent — of annuities sold each year.