Immediate annuities are a great way to help you create and manage a sustainable retirement income once those biweekly paychecks stop flowing in. But it's not as easy as giving an insurer your money and then cashing your checks — there are a lot of details worth knowing that can only help you in the long run. For that, an independent insurance agent could be your greatest ally.
An independent insurance agent can help you make sense of all the fine, little print and compare immediate annuity rates from some of the best companies out there. But first, why not dive into a little more background on immediate annuities, from the whats to the hows, to the rates.
Understanding Single Premium Immediate Annuities
For starters, Single Premium Immediate Annuities (SPIA) are also called Single Payment Immediate Annuities, or even just immediate annuities for short. And simply put, they are financial products insurance companies offer to help individuals turn a lump sum of cash into a guaranteed steady stream of income.
Immediate annuities have a number of different financial benefits, like monthly income payments for the rest of your life, long-term stability, and financial risk management in retirement.
The right immediate annuity option can help maintain your quality of life and provide protection from outliving your savings, which is happening more and more each day with rising inflation and market uncertainty.
What Factors Affect Immediate Annuity Rates?
When it comes to your financial return, you want the best you can get, right? Of course you do. That's why knowing how to get the best possible annuity rates is important. And it's even more important to know what exactly goes into deciding your rate. Basically it's all a confusing algorithm that incorporates a few things, like:
- Current interest rates: If interest rates are high when you purchase your annuity, you can expect your annuity payments to be higher than if interest rates were low. That's because the insurer predicts it can earn more by investing your money.
- The amount deposited in the annuity: The more money you put into your annuity through monthly premiums or a lump sum, the more you expect to get back as income.
- Policy options: The more options you add to your policy, like a joint policy and a death benefit, the lower your annuity payouts. This is because these extra policy features increase the costs to the insurer.
- The policyholder’s age: The older you are when you first purchasing an annuity, the higher your annuity payments will be. That's because individuals aren't expected to live as long as those who fund their annuity at a young age.
- The policyholder's gender: Because women live longer than men, they receive less money than men of the same age.
Some of these factors are things that you can play around with to help get a better return, like the amount deposited and the options you choose. But others, like age and the current rates, are unfortunately out of your control.
As an example, here's a brief overview of current returns of an immediate annuity based on a policy holder's age and gender funded with a $100,000 premium:
|Premium Company||Age||Monthly Payout |
|North American Company for Life and Health||65||$495 / $477|
|75||$606 / $587|
|Protective Life Insurance Company ||65||$492 / $462|
|75||$622 / $567|
|New York Life||65||$459 / $437|
|75||$594 / $560|
Of course, this is only a small sampling of insurers. An independent insurance agent can sit down with you and help find the best options for your needs and goals, comparing a wide range of companies and policies.
Finding the Best Immediate Fixed Annuity Rates
Fixed annuities are a type of annuity that provides a fixed rate of return on the insurer’s underlying investments. Because they're fixed, you're able to protect your income from a downturned market, but at the same time, you won’t be able to enjoy significant gains on the investment.
Because of this, immediate fixed annuities are designed for those who want to protect their retirement income instead of risking potential losses.
Current immediate annuity interest rates tend to hover around 3%-4% on average, so you can use that as a baseline to compare insurers. But you will have to consider the policy details like surcharges and commissions and how they align with your financial goals.
Comparing Five-Year Immediate Annuity Rates
With all this talk about rates, it's time to compare the current (2019) immediate annuity rates of a few key companies currently offering five-year immediate annuities:
|Atlantic Coast Life Insurance Company||3.65%|
|Sentinel Security Life||3.62%|
|Sentinel Security Life||3.62%|
|Atlantic Coast Life Insurance Company||3.55%|
|Liberty Bankers Life||3.00%|
|Fidelity & Guaranty Life||2.95%|
The Best (aka "The Highest") Immediate Fixed Income Annuity Rates
And because you want, and deserve, the best, here's where some of the highest fixed income annuity rates currently are for 2019:
|Jackson National Life||4.34%|
|Penn Mutual Life||4.19%|
|Lincoln National Life||4.10%|
|New York Life||4.03%|
Now that you have an understanding of immediate annuity rates, you probably want to take action. And an independent insurance agent is hands down the best option for you.
That's because they're absolute experts in the worlds of insurance and finance, helping clients every day find policies that fit their unique needs and goals. And what's even better is that because they’re independent, they work on your behalf — not the insurer's.
And when it comes to your retirement’s finances, that kind of peace of mind goes a long way.