Annuities and mutual funds are common investment choices for retirement money, and many consumers view them as nearly identical. But the two are extremely different. Neither annuities nor mutual funds is appropriate for every investor, and careful consideration must be taken before contributing retirement money to one of these types of accounts.
Annuities and mutual funds can both take advantage of market increases. However, how much you benefit from the upswing depends entirely on your asset allocation and on the type of annuity or mutual funds you own. If your variable annuity or mutual fund account is allocated to equity-based investment choices, you should experience an increase in value proportionate with your exposure. Variable annuities and mutual funds react very similarly to changes in the market, depending on your fund choices. However, if you own a fixed annuity, any dramatic stock market gains are irrelevant because your interest rate remains
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