There are generally three types of annuities: fixed, variable and indexed, which may be immediate or deferred. The type of annuity you choose will determine how you earn (or lose) money based on the annuity’s performance. It is extremely important to understand how the annuity earns money, as well as how it subjects your investment to risk. With so many options on the market, ask a few simple questions before you add an annuity to your portfolio.