Speak with a Registered Agent: 1-866-223-2121

Speak with a Registered Agent: 1-866-223-2121

Everything You Need To Know About

Fixed Annuities

Previous Date: 2024-03-18
Current Date: 2024-03-18
Should Update: false

Top Fixed Annuity Rates

updated
2024-03-18
5.75%
3 YEARS
5.95%
5 YEARS
6.35%
7 YEARS
6.75%
10 YEARS

VIEW THE HIGHEST MYGA RATES SINCE 2009!

What is a Fixed Annuity?

Multi-Year Guarantee Annuity is a term used to describe a fixed annuity that has an interest rate guarantee for the same period of time as its surrender period. For example, an annuity with a guaranteed interest rate of 5% per year for five years, where there are no surrender penalties after five years. Some offer a higher rate the first year, and a lower, but guaranteed rate, for all subsequent years of the surrender period – e.g. 8.5% first year, with a guaranteed renewal at 4% for years 2-5 for a blended average of 4.88% per year for five years. The key feature is that you know what interest rate you get for the entire surrender period, and for this reason we ONLY recommend Multi-Year Guarantee Annuities.

Current Top Rates

Top Rates as of 02/26/24

3 Year MYGA

CL Life

CL Sundance 3

6.00%

5 Year MYGA

Wichita National Life

Security 5

6.30%

7 Year MYGA

Nassau Life and Annuity

Nassau MYAnnuity 7X

5.80%

10 Year MYGA

Heartland National

Secure Rate 10

5.80%

Advisor Insight

Derek Stamos

Licensed Professional

Fixed annuities are often overlooked due to bells and whistles associated with indexed annuities. A Multi Year Guaranteed Annuity (MYGAs) pays a constant and guaranteed rate of interest each year during the selected period. The investor can spend the interest as income or allow it to compound inside the contract in a tax deferred basis. The simplicity and predictable outcome allows for many different uses including RMD distributions, wealth transfer and accumulation. As with any annuity contract it is important to understand the differences between the products. The most common mistake is taking the highest interest rate without factoring the liquidity provisions and duration of commitment.

Articles & Reviews

The Benefits of Buying Fixed Annuities Now

Are you considering purchasing a fixed annuity in this current high rate environment? Steve Kaufman brings to light a significant turn in the tide with his latest article: “The Benefits of Buying Fixed Annuities Now”.

This is an Exceptional Time for Prospective Annuity Buyers

Learn why this is an excellent time for would-be annuity owners and repeat annuity owners to seriously consider purchasing an annuity.

Robust Stock Market or Not, Fixed Annuities Make Sense as an Income Hedge

Should you diversify? Below are some examples of competitive income strategies for a single, 65 year-old with an initial investment of $100k. The stock market has been on a roll for well over a year and few market gurus think the proverbial punch bowl will disappear anytime soon. Small wonder, then, that growth fixed indexed …

From Our Blog

How to Purchase Annuities

Forbes recently published an article called  “How to Buy an Annuity” by John Egan. This article includes tips to begin and continue the journey towards purchasing an annuity. A lot of retirees who could benefit from investing in annuities typically steer clear of them, and it is because many Americans underestimate how long they live. …

Balance of Growth and Security Is Top Priority as Annuities Rise

The financial environment in 2022 led more people to seek the protection offered by fixed annuities. This can be attributed to the unprecedented long-term market volatility and rising interest rates not seen since the financial crisis.

Annuity Sales for Q1 At All-Time High, Limra Says

After record breaking sales in 2022, Q1 annuity sales for 2023 hit $92.9 billion, a 47% increase. Information from InsuranceNewsNet confirms that this is the highest quarterly sales ever recorded with results from LIMRA’s Preliminary U.S. Individual Annuity Sales Survey. “Market conditions continue to drive investor demand for annuities. Every major fixed annuity product line …

Fixed Annuity/Multi-Year Annuities

Fixed Rate Include Multi-Year Guarantee Annuities (MYGAs) and CD-type Annuities

Multi-Year Guarantee Annuity is a term used to describe a fixed annuity that has an interest rate guarantee for the same period of time as its surrender period.

Multi-Year Guarantee Fixed Annuities differ from “banded rate” fixed annuities, which may offer a guaranteed interest rate for the first year only and then a renewal rate that can vary – e.g. 8% for the first year and a minimum of 2% for years 2-5, for a blended rate of 3.17% over five years. Banded rate fixed annuities are designed to lure you with a high first-year rate, without being up-front about the uncompetitive blended rate over the entire time horizon. Also, note that banded rate fixed annuities pay the greatest commission to financial planners – on average two to three times the commission on Multi-Year Guarantee Fixed Annuities! So, unfortunately, unscrupulous financial planners may try to sell you an inferior product to increase their own commission. You can read a more detailed discussion of banded-rate annuities, and why we don’t recommend them here.

When evaluating the numerous fixed annuity products on the market, Annuity FYI looks for a) features of the fixed annuity itself; and b) the company issuing the annuity.

Criteria We Use in Evaluating the Annuity:

  1. The highest rates for all possible guarantee periods.
  2. Strength of the renewal rate history.
  3. Correlation of rate period and surrender period, e.g. we don’t favor annuities that offer a three-year guarantee with a six-year surrender period.
  4. Higher penalty-free withdrawal amounts
  5. Plans with market value adjustments (MVA). The presence of an MVA doesn’t make the plan bad or good, you just need to know that it exists.

Criteria we use in evaluating the insurance company issuing the annuities and riders are:

  1. High safety ratings of the issuing company — almost all fixed annuities are in the general accounts of the issuing company, so strong safety ratings are critical.
  2. Company management, customer service, and ease of account access.

Information

Show Example of Fixed Annuity/Multi-Year Annuities

An annuity with a guaranteed interest rate of 5% per year for five years, where there are no surrender penalties after five years. Some offer a higher rate the first year, and a lower, but guaranteed rate, for all subsequent years of the surrender period – e.g. 8.5% the first year, with a guaranteed renewal at 4% for years 2-5 for a blended average of 4.88% per year for five years.

The key feature is that you know what interest rate you get for the entire surrender period, and for this reason we ONLY recommend Multi-Year Guarantee Annuities.

What are the Differences Between Bank CDs and Multi-Year Guarantee Annuities?

The term Multi-Year Guarantee Fixed Annuity came about because the returns are guaranteed for a fixed period, like bank certificate of deposits (“CDs”). However, the similarities stop there – in fact fixed annuities are very different than bank CDs. Here are the most significant differences between “MYG” fixed annuities and bank CDs:

Bank CDs vs Fixed Annuities Defined

Bank CDs are typically issued by banks. As such, they are covered by FDIC guarantees. Fixed annuities are issued by insurance companies, and are not insured by the FDIC. In almost every case, fixed annuity guarantees are subject to the claims-paying ability of the issuing life insurance company — it is important that you check the latest financial strength ratings of the insurance company before investing any money. Fixed annuities are typically covered by state guaranty funds that protect your investment — $100,000 to $300,000 in most states, and up to $500,000 in states such as New York and Washington. Annuity FYI can furnish you with the latest insurance company financial strength ratings, as well as information about the guaranty provided by your state.

Interest Rates

Fixed annuities typically offer higher interest rates than bank CDs. Check our fixed annuities comparison table to check out the most competitive rates, and compare them to CD rates from a source such as Bankrate.com.

Taxes

Fixed annuities and bank CDs are taxed differently. Unless they are held within a retirement account such as an IRA or 401k, gains on bank CDs are taxed every year; gains on fixed annuities are not, and subsequently your return on a fixed annuity would be greater than a bank CD if the interest rates are equivalent. For example, take an investment of $100,000 at 5% in a CD and a fixed annuity. After year 1, in the fixed annuity you have $105,000. In the bank CD, you have $103,500 (assuming a 30% combined income tax bracket). After five years, the fixed annuity would be worth $127,628, compared with a bank CD of $118,769. If you decided to take income off of the fixed annuity, it will be based on the pre-tax amount — $127,628 in this case. And even if you decided to cash out of the fixed annuity (assume you are over 59½ — see #4 below — and the same 30% tax bracket) you would have $19,339. For an illustration based on your particular investment profile, contact an licensed financial professional at 1-866-223-2121

Keep in mind that if you cash out of a fixed annuity and you are younger than 59½ years old, the IRS will penalize you by taking 10% of interest gains. To avoid the IRS penalty prior to 59½ years of age, you must roll the money into another annuity. In this regard, fixed annuities should be considered retirement vehicles, regardless of the surrender schedule.

Withdrawals

Keep in mind that if you cash out of a fixed annuity and you are younger than 59½ years old, the IRS will penalize you by taking 10% of interest gains. To avoid the IRS penalty prior to 59½ years of age, you must roll the money into another annuity. In this regard, fixed annuities should be considered retirement vehicles, regardless of the surrender schedule.

The most competitive fixed annuities typically permit withdrawals of the previous twelve months’ interest, without an insurance company penalty. Some allow you to withdraw 10% of your premium per year without an insurance company penalty. Bank CDs typically do not permit withdrawals without penalties.

Should I Invest in a Bank CD, or in an Annuity with Multi-Year Guaranteed Returns?

If you are looking for a guaranteed rate of return over a fixed term, Annuity FYI encourages you to research “MYG” fixed annuities – primarily because of their higher interest rate guarantees and tax advantages over bank CDs. However, closely examine the terms and conditions of any fixed annuity before investing.

  • Does the fixed annuity have a guaranteed interest rate for the entire rate period, or can the rate change after the first year? If so, what will that rate be?
  • Is the guaranteed rate competitive with other products on the market?
  • What is the financial strength rating of the insurance company issuing the fixed annuity? What do the ratings mean? Is a rating of “A-” with A.M. Best good or bad?
  • What is the guaranty provided by my state?
  • Are withdrawals permitted during the term of the fixed annuity?
  • What are the insurance company and IRS penalties if I need to withdraw my money early?
  • Does the fixed annuity have a Market Value Adjustment (MVA)? How does an MVA affect me?

Information Request Form

If you have questions or would like more information, please complete this form and a licensed professional will be happy to help.

By providing your information and clicking 'Submit' above, you acknowledge that you have read and agree to this site's privacy policy. You also provide your consent to be contacted at the email address or phone number provided above (including any wireless number) by licensed agents or representatives from or on behalf of AFYI Holdings Group, LLC and other companies to provide the information requested and/or offer annuities or financial products. You understand that these calls or SMS messages may be generated using an automated telephone dialing system, a pre-recorded message, or artificial voice. Consent to receive such messages is not a condition to purchase any goods or services. You may opt out at any time by following the instructions in the messages you receive.  Receiving quotes and information through our website is free, and you are under no obligation to purchase any goods or services as a result of this request. You affirm that you are the subscriber of the provided telephone number or that the subscriber authorized you to provide the number. Message and data rates may apply. AFYI Holdings Group, LLC is committed to respecting your privacy and adhering to all applicable laws and regulations, including the Telephone Consumer Protection Act (TCPA).