Bonds and fixed annuities are both considered "safe" — but they behave very differently when interest rates move. Here's a clear comparison of how each one works.
People often lump annuities and bonds together as "safe, income-producing" choices — but they work quite differently. A bond is a loan you make to a government or company. A fixed annuity is a contract with an insurance company that guarantees your rate or income. Understanding the difference helps you see where each belongs.
| Feature | Individual Bond | Fixed Annuity (MYGA) |
|---|---|---|
| Principal protection | At maturity, if held to term (issuer must stay solvent) | Guaranteed by the insurer |
| Price swings before maturity | Yes — bond values move with interest rates | No — value doesn't fluctuate with the market |
| Return | Set coupon; resale price varies | Guaranteed rate for the full term |
| Tax treatment | Interest usually taxed yearly | Tax-deferred until withdrawal |
| Backed by | The issuer (government or company) | The insurer + state guaranty association |
| Complexity | Can require active management / laddering | Set it and leave it for the term |
Here's the distinction that surprises people most. If you own an individual bond and interest rates rise, the market value of your bond falls — if you needed to sell before maturity, you could get back less than you paid. Bond funds can lose value for the same reason.
A fixed annuity doesn't work that way. Your rate is locked for the term and your account value doesn't drop when rates move. You trade some flexibility for that stability.
Bonds can lose value if you have to sell early in a rising-rate environment. A fixed annuity's value stays put — you know exactly what you'll have at the end of the term. That predictability is the whole point.
Many retirement plans use both. The point isn't that one is "better" — it's understanding what each does so the safe part of your plan is built the way you want it.
No pressure, no obligation. Explore the rate tool, take the 2-minute quiz, or ask Devin anything — whatever helps you understand your options.