Who has the world's best coffee? Dunkin Donuts? Starbucks? What about the diner down the street? It depends on who you ask, and there are strong opinions. Who has the best annuity rates? Well, that depends on when you ask. That's because insurance companies change them constantly, sometimes weekly. And, there are over 1500 fixed annuities on the market. What's a smart shopper to do?
Thinking about buying a fixed annuity? A simple guide to fixed annuity rates will help, and so can an independent insurance agent. Independent insurance agents are annuity professionals. Every day they help folks just like you make smart decisions.
Why Are They Fixed?
The reason why fixed annuities are called fixed is a bit confusing. The value of fixed annuities is measured by dollars. When the value of a fixed annuity rises or falls it's because there are more or less dollars in the account.
On the other hand, the value of variable annuities is represented by units. The value of each unit rises and falls with the investment it represents. The account value of a variable annuity rises and falls based on the value of the units, not because there are more or less units.
The Three Types of Fixed Annuities
Multi-year guaranteed annuities: MYGAs offer a rate of interest guaranteed for a set number of years. Typically, buyers can choose from a 1-, 3-, 5-, 7- or 10-year rate. Interest is credited annually. MYGAs will typically offer rates that are higher than CDs. At the end of the guarantee period the insurance company will reset the rate. The renewal rate has to equal or exceed the renewal guarantee in the MYGA policy.
Fixed indexed annuities: These also guarantee principal. Instead of offering a rate of interest the insurance company credits the account value based on the gains of a financial index, like the S&P 500. The gain cannot exceed the limit set by the insurance company called a cap. If the index loses value the account value remains the same. The advantage of a fixed indexed annuity is the owner can benefit from the performance of the stock market without investment risk. Many fixed indexed annuities offer a Guaranteed Lifetime Withdrawal Benefit. A GLWB creates lifetime income without giving up the principal.
Immediate fixed annuities: These are also known as income annuities. That's because the insurance company begins to pay an income immediately after receiving a purchase payment, or premium. Immediate fixed annuities have several options for income:
Life Only — A payment is guaranteed for the lifetime of the annuitant. No payments are made after the annuitants death. Life only options will pay out a higher monthly or annual income than the other options. Joint and Survivor Life only is available for the longer of two lives, usually spouses.
Life & Period Certain — Payments are guaranteed for the lifetime of the annuitant. The payments are made for at least a "certain" number of years regardless of when the annuitant dies. The certain year options are usually 10 and 20. Joint and Survivor options are available for Life and Period Certain.
What's in a Rate?
The performance of a fixed annuity is based on the interest rate. The higher the better, of course. Fixed annuities, however, are at least a three-year commitment. The guarantees are only as good as the financial strength of the insurance company.
The point is, when you are looking for the best rate consider the financial ratings of the company as well. Remember, the best rate you see today may not be the best rate you see tomorrow or next week.
How do you find the best rate? Of course there are websites out there that are dedicated to providing fixed annuity rates. Your best bet, though, is to talk to an independent insurance agent. They're annuity professionals, and it's their job to help you find the best value for you.
The five top companies as listed below as of March 3, 2020, for MYGA 3-, 5-, 7-, and 10-year rates are shown in the chart below.
Companies Offering Top Five MYGA Rates
|3 Year||5 Year||7 Year||10 Year|
|Fidelity & Guarantee||x|
|Equitable Life & Casualty||x|
*Annuityratewatch.com as of March 3, 2020
Fixed Indexed Annuity Rates
FIA rates are a bit tricky. There are different methods and financial indexes that are used to measure performance. The most common is an annual point to point cap using the S&P 500 index. If you are not familiar with fixed indexed annuity rates and features check out this article. The five top companies as listed as of March 3, 2020, are listed below.
1 - Equitable Life and Casualty
2 - Guarantee Income Life and Casualty
3 - Oxford Life
4 - Nassau Life and Annuity
5 - Lincoln Financial
Immediate Fixed Annuity Rates
Immediate fixed annuity rates are also a little tricky, because the rate is different for each option at every age. A professional independent insurance agent can provide immediate fixed annuity rates customized to your age and income requirements.
The Benefits of an Independent Insurance Agent
Fixed annuities can be an important part of your retirement plan. While they have many features and benefits, they are not for everyone. Annuities are complex, and searching through options can be confusing, time-consuming, and frustrating. An independent insurance agent's role is to simplify the process. They offer the products of many different companies. They work for you, not the insurance company. They have the experience and knowledge to help you decide if a fixed annuity is right for you.
TrustedChoice.com Article | Reviewed by Jeffrey Green
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