Massachusetts retirees buying fixed annuities face a straightforward tax picture: a flat 5% state income tax on withdrawals, no broad retirement income exemption, and one of the highest premium tax rates in the country at 2.28%. What they gain in return is clarity, no complicated subtraction rules to track, no phase-outs to calculate.
Eleanor, 67, is a retired Boston University administrator with $275,000 in maturing CDs and a 403(b) to consolidate. She’s well past the point where a savings account makes sense for the bulk of her liquid assets, and CD rates at her current bank are running nearly a full percentage point below what MYGA rates are offering. Massachusetts’ financial services community is deep, she has no shortage of qualified annuity advisors to choose from.
This page covers the current fixed annuity rates available to Massachusetts residents, how the state’s premium tax affects pricing, and what the $250,000 guaranty fund limit means for a deposit like Eleanor’s.
Best Annuity Rates in Massachusetts: 2026 Rate Table
The rates below are from A-rated carriers available to Massachusetts residents as of March 2026. A multi-year guaranteed annuity (MYGA) locks in the rate for the full term, there are no resets, no annual reviews, and no market risk.
Rates shown are for informational purposes only and subject to change without notice. Products marked SI use simple interest, effective compound yield is lower than the stated rate. Minimum premiums shown are for non-qualified (after-tax) funds. Always verify current rates with a licensed annuity professional before purchasing.
On Eleanor’s $275,000 in maturing CDs deposited into a 5-year MYGA at 5.60%, she’d earn approximately $85,095 in guaranteed interest. At Massachusetts’ 5% flat rate, the state income tax on those gains at distribution would be approximately $4,255, roughly 5 cents on every dollar of interest earned.
How Massachusetts Regulations Affect Your Annuity Rate
Massachusetts charges carriers a 2.28% premium tax on annuity deposits, which is among the highest state premium tax rates in the country. This cost is embedded in carrier pricing, which is one reason Massachusetts residents sometimes see rates very slightly below what’s offered in lower-premium-tax states like Arizona (1.83%). That said, the major carriers still compete aggressively in Massachusetts given the state’s large, high-wealth retiree population.
Annuity sales are overseen by the Massachusetts Division of Insurance, which regulates suitability standards, replacement disclosures, and advertising practices. Massachusetts has adopted best-interest standards aligned with the NAIC model regulation, your agent is required to document that the recommended product genuinely serves your financial interests.
The standard free look period is 10 days for most buyers. For seniors age 65 and older, replacing an existing annuity contract, Massachusetts extends the free look to 30 days. If you’re consolidating an existing annuity into a new product, Eleanor’s situation is a good example of where that 30-day window gives her extra time to compare the old contract’s surrender charges against the new product’s illustrated rate.
Massachusetts Life and Health Insurance Guaranty Association: What It Covers
The Massachusetts Life and Health Insurance Guaranty Association protects annuity owners up to $250,000 per person, per insurer in the event of carrier insolvency. This is at the lower end of the range nationally, states like Virginia ($350,000) and Washington ($500,000) provide considerably more headroom at the per-carrier level.
Eleanor’s $275,000 deposit exceeds Massachusetts’ $250,000 limit by $25,000. The simplest solution: deposit $250,000 with one A-rated carrier and $25,000 with a second. Both amounts are fully covered, and she’s not giving up meaningful yield on the smaller tranche, most carriers accept deposits as low as $10,000–$25,000 at competitive rates.
Alternatively, she could deposit the full $275,000 with one carrier and accept that $25,000 sits above the guaranty fund ceiling. Given that A-rated carriers have historically had very low insolvency rates, some buyers choose simplicity over perfect coverage. That’s a personal risk tolerance call. Full background on how guaranty fund protection works is at our state guarantyassociations’s guide.
Massachusetts’ $250,000 limit is a meaningful planning constraint for the state’s higher-net-worth retiree population. The split-carrier approach is common and adds very little administrative complexity.
Annuity Tax Treatment in Massachusetts
Massachusetts taxes ordinary income, including annuity withdrawals, at a flat 5%. Unlike Colorado or Virginia, Massachusetts offers no broad retirement income subtraction or age-specific deduction for private-sector retirees. What you receive is predictability: 5 cents on every dollar of annuity income, no complex phase-outs, no marginal rate calculations.
There is one notable exception: Massachusetts public employees who receive pension income from the state retirement system (MTRS or MSERS) may exclude that pension income from their Massachusetts taxable income. This doesn’t apply to private-sector annuities, but it matters for Eleanor if she receives any MTRS pension income separately from her 403(b)-funded annuity.
Annuity withdrawals from a non-qualified contract (purchased with after-tax dollars) are subject to the exclusion ratio, the portion of each payment that represents a return of your original premium is not taxable. Only the gain portion is subject to the 5% state tax. This can reduce your effective Massachusetts tax rate on annuity income below 5%, particularly in the early years of a payout.
Massachusetts partially taxes Social Security benefits in specific circumstances, which is less common than full exemption states. For most retirees, this means the total state tax picture is slightly more complex than in a pure no-SS-tax state like Virginia. Consult a Massachusetts-licensed tax advisor to understand your specific situation before projecting after-tax annuity income.
How to Buy an Annuity in Massachusetts: Step by Step
- Clarify your deposit structure first. Given Massachusetts’ $250,000 guaranty limit, deposits above that amount should be planned across two carriers before you start rate shopping. Decide on your allocation split (e.g., $250,000 / $25,000 or two equal tranches), so you’re comparing rates with the right deposit size in mind, some carriers offer rate tiers at $100,000 and $250,000 breakpoints.
- Compare current rates by term from A-rated carriers. Our live rate table updates regularly with the top offers for Massachusetts residents. For Eleanor’s 5-year timeframe, the 5-year fixed annuity category is the primary focus, but comparing the 3-year and 7-year options side by side is worth 10 minutes of time before committing.
- Request free quotes with after-tax illustrations. At 5% state income tax, the after-tax yield on a 5.60% MYGA works out to approximately 5.32% effective yield, still well above most CD rates. Get a free quote that shows both the gross credited rate and the net after-federal-and-state-tax yield for your projected distribution amount.
- Confirm your agent’s Massachusetts license. The Massachusetts Division of Insurance maintains a public license directory. Any agent recommending you replace an existing annuity or 403(b) must provide a written replacement notice. Keep a copy of every disclosure form you receive.
- Review the contract carefully during your free look period. Most buyers have 10 days; seniors 65+ replacing an existing contract get 30 days. Check the surrender charge schedule against the term length, the free withdrawal provision (typically 10% per year penalty-free), and the beneficiary designation. Confirm there are no admin fees or mortality and expense charges, those apply to variable annuities, not fixed or MYGA products.
For a comprehensive walkthrough of every stage of the annuity purchase process, see our guide on how to buy an annuity.
Frequently Asked Questions About Annuities in Massachusetts
How does Massachusetts tax annuity withdrawals?
Massachusetts taxes annuity distributions as ordinary income at a flat 5% rate. There is no broad retirement income exemption or age deduction for private-sector retirees. However, withdrawals from non-qualified annuities (funded with after-tax dollars) are subject to the exclusion ratio, meaning only the gain portion, not the return of your original principal, is taxable. The tax calculation is simpler than in many other states: 5 cents in state tax per dollar of taxable annuity income.
What is the Massachusetts annuity guaranty fund coverage limit?
The Massachusetts Life and Health Insurance Guaranty Association covers up to $250,000 per person, per insurer. This is at the lower end of the national range. Massachusetts retirees depositing more than $250,000 should split funds across two A-rated carriers, with one deposit at or below $250,000 per carrier, to ensure full guaranty fund coverage on both tranches.
Does Massachusetts tax Social Security benefits?
Massachusetts’ treatment of Social Security is nuanced. At the state level, Social Security is generally not taxed for most retirees. However, Massachusetts follows federal rules for determining taxable Social Security income, and if your combined income is high enough to trigger federal Social Security taxation, Massachusetts may also tax a portion. For most retirees with moderate incomes, Social Security is not taxed by Massachusetts. A Massachusetts-licensed tax advisor can confirm your specific situation based on total retirement income.
Can I use a 1035 exchange to move an existing annuity into a higher-rate product in Massachusetts?
Yes. A 1035 exchange, transferring an existing annuity contract to a new one with a different carrier, is not a taxable event at the federal or Massachusetts state level. The transfer must go carrier-to-carrier (not distributed to you first), and both contracts must qualify as annuities. If the existing contract has surrender charges, those may reduce the net amount transferred and affect the economics of switching. Massachusetts’s 30-day free look for seniors 65,+ replacing existing contracts, ts gives you ample time to verify the new product is a net improvement. See our MYGA guide for how 1035 exchanges commonly work in practice.
