Can annuities lose money? The answer is yes, but the level of risk depends on the type of annuity you choose. Here's a closer look at how different types of annuities can decrease in value:

Single Premium Immediate Annuities (SPIAs): While SPIAs guarantee a steady income, they aren’t immune to inflation. Since the payouts are fixed, they don’t adjust for rising costs, meaning the same amount of money will buy less over time as prices go up.

Multi-Year Guaranteed Annuities (MYGAs) and Fixed Annuities: These offer a fixed interest rate for a set period, but like SPIAs, inflation can eat away at their real value. Even with a guaranteed return, high inflation can reduce the purchasing power of your earnings.

Fixed Index Annuities (FIAs): FIAs are linked to a market index, but watch out for fees. In years where the market underperforms or stays flat, fees can chip away at your potential earnings, even though your principal is protected from market declines.

Variable Annuities: These are tied directly to the stock market, so your account balance will rise and fall with market performance. When the market takes a downturn, you can lose money, and the typically higher fees associated with variable annuities can make these losses feel even more significant.

Each type of annuity carries its own risks, whether it’s inflation, fees, or market volatility. Being aware of these risks will help you make smarter choices for your financial future.

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