What Are Annuity Rates?

An annuity rate is the percentage by which an annuity grows each year. Annuity rates can fluctuate from company to company on a regular basis and are often tied to current interest rates. Some of the highest annuity rates belong to top-rated insurance companies, although there is not always a direct relationship.

Key Takeaways
  • Annuity rates fluctuate weekly and multi-year guaranteed annuities change daily. Choose how you want to receive payments and when, then you can get a general idea of a good interest rate range.
  • The different surrender period lengths are correlated with high and low annuity rates.
  • It's equally important to consider the company selling the annuity. A high-interest rate won't matter if that company goes broke or files for bankruptcy.

Understanding Annuity Rates

Fixed annuities generally offer a guaranteed static interest rate for a specific time period.

Current annuity rates can mirror bond interest rates. When bond rates increase, annuity rates also tend to rise.

That’s because insurance companies invest most of their client’s capital in fixed income securities, such as conservative bonds.

However, interest rates continue to fall.

In 1982, for example, a 30-year Treasury bond yield was almost 15 percent. By October 2020, that yield had dropped to just 1.65 percent.

“Interest rates are at all-time lows and not likely to increase anytime soon,” said Mark Cavalieri, associate director of multiyear guaranteed annuity sales at Nebraska-based SMS Financial Solutions.

To combat this challenge, Cavalieri said top-rated insurance companies are focusing attention on a specific type of annuity.

“They’ve decided to go after more fixed annuity business during the [COVID-19] pandemic crisis,” he said. “Insurance companies are stimulating new business by offering higher rates on their multiyear guaranteed annuity products than they usually do.”

Now, the best fixed annuity rates yield more than either Treasury bonds or high-performing certificates of deposit, Cavalieri noted.

Watch: RetireGuide's top five tips for finding the best annuity.

Surrender Periods and Annuity Rates

Most annuities feature a surrender period, or a time during which you cannot withdraw funds from your account without facing a charge or fee.

Some annuity contracts are more flexible than others and may allow you to withdraw your money more easily. Others don’t allow any withdrawals during the surrender period.

Annuities with tight restrictions on withdrawals tend to pay higher rates.

The best annuity rates today may be different tomorrow. It’s important to check with insurance companies to confirm their specific rates.

Josh Curtis, Independent Financial Advisor at RetireGuide, explains the structure of a 10-year annuity.

Comparing Annuity Rates

An annuity rate plays a direct role in your annuity payout, or how much money you receive from the insurance company. But other factors also contribute.

Factors that also influence the size of your annuity payouts include:
  • Age
  • Life expectancy
  • Gender
  • The type of annuity you purchase
  • How much money you invest
  • Extra features you purchase

Annuity rates are set by the insurance company that issues the contract.

The calculations some companies use to determine rates of return can be complex, so it’s important to ask questions along the way.

Make sure the broker or agent clearly explains the annuity rate formula. Check to confirm the rate will not fluctuate over time.

Rates on variable annuities, for example, can increase or decrease depending on the performance of underlying investments. Most variable annuities will offer a minimum guaranteed rate, but this protection may come at an additional cost.

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Consult Independent Rating Agencies

It’s always important to buy annuities from financially strong insurance companies.

While a CD is purchased at a bank or credit union and insured by the Federal Deposit Insurance Corp., an annuity is backed only by the private insurer that issues it.

If that company goes broke or bust, you could lose money.

You can check a company’s financial strength by consulting nationally recognized impartial rating agencies. The most popular is A.M. Best, and the highest rating awarded by the agency is A++.

Most experts recommend vetting insurers with a rating of A- or above for long-term annuities.

Other rating agencies include Standard & Poor’s, Moody’s and Fitch.

A.M. Best and other agencies rate a company based on its ability to pay financial obligations and make good on claims down the road.

There is often a tradeoff between high grades from independent agencies and competitive rates. A company may offer a very attractive annuity rate — but the insurer’s financial history may not be as strong as its competitors.

If you’re in the market for an annuity, first determine how much money you want to invest. Then, shop around to explore various rates from dependable companies.

Get quotes from several potential providers — the same way you would for any major purchase.

Stress-Free Annuity Buying
Our financial experts can guide you through the annuity buying process so you can focus on your retirement, asset protection or income generation.

Best Annuity Rates in 2021

Multiyear guaranteed annuities are a fixed annuity that locks in a stable interest rate for a specified time period.

Below are 10 examples of the best annuity rates as of November 2021. Surrender periods last three to 10 years.

Examples of Annuity Rates in November 2021
ProductSurrender PeriodRateA.M. Best Rating
Multi-Select10 years2.95 percentA
Harbourview10 years3.05 percentA-
Bankers Elite (nonliquid)9 years3 percentA-
Multi-Select8 years3 percentA
Guarantee Plus 100k+7 years2.2 percentA+
Guarantee Platinum7 years2.7 percentA-
Palladium MYG 250k+ 7 years2.45 percentA
Multi-Select6 years2.85 percentA
Guarantee Platinum5 years2.45 percentA-
Guarantee Plus 100k+3 years1.8 percentA+
Source: Senior Market Sales

Frequently Asked Questions About Annuity Rates

What is a good annuity rate?

If you are looking to buy an annuity, what counts as a good rate of growth each year can vary by the type you purchase and other factors. Current interest rates often play a role as well.

Who has the best annuity rates?

In 2021, some of the best rates belonged to annuity companies like Multi-Select, Guarantee Choice 100k+ and Bankers Elite. All three had rates between 1.95 and 3 percent.

What type of annuity has the best rates?

What counts as the best rate depends on the type of annuity you are looking for, how much risk or stability you prefer and other factors. Fixed annuities typically offer a guaranteed rate over a certain period of time.

Last Modified: November 16, 2021

7 Cited Research Articles

  1. FRED, Federal Reserve Bank of St. Louis. (2020, November 1). Board of Governors of the Federal Reserve System (US), 30-Year Treasury Constant Maturity Rate [DGS30]. Retrieved from https://fred.stlouisfed.org/series/DGS30
  2. U.S. Department of the Treasury. (2020, October 30). Resource Center. Retrieved from https://www.treasury.gov/resource-center/data-chart-center/interest-rates/pages/textview.aspx?data=yield
  3. Lankford, K. (2020, May 21). 5 Things You Should Know About Annuities. Retrieved from https://www.aarp.org/retirement/retirement-savings/info-2020/learn-about-annuities.html
  4. Carey, M. (2019, December 4). Best Fixed Annuity Rates For April 2020. Retrieved from https://www.forbes.com/sites/mattcarey/2019/12/04/best-fixed-annuity-rates-for-january-2020/#1a5aad7d3209
  5. Indiana Department of Insurance. (n.d.). Guide to Annuities. Retrieved from https://www.in.gov/idoi/2568.htm
  6. Wall Street Journal. (n.d.) How to Select and Shop for an Annuity. Retrieved from https://guides.wsj.com/personal-finance/retirement/how-to-select-and-shop-for-an-annuity/
  7. U.S. Securities and Exchange Commission. (n.d.). Annuities. Retrieved from https://www.investor.gov/introduction-investing/investing-basics/glossary/annuities