Best 10 Year Fixed Annuity Rates May 2021
Today's Best 10 Year Fixed Annuity Rates
As of May 2021, the best 10 year fixed annuity rate is 3.10% issued by Guggenheim Life and Annuity.
|Fixed Annuity Compamy||Rating||Fixed Annuity||Rate|
|Guggenheim Life and Annuity||B++||Preserve MYGA 10 High Band||3.10%|
|Guaranty Income Life||B++||Guaranty Rate Lock 10 High Band||3.00%|
|Sentinel Security Life Insurance||B++||Personal Choice Annuity 10||3.00%|
|Atlantic Coast Life||B++||Safe Haven 10||3.00%|
|Guaranty Income Life||B++||Guaranty Rate Lock 10 Low Band||2.90%|
|Upstream Life||B++||Secure Legacy 10 Year||2.90%|
|Guaranty Income Life||B++||Guaranty Rate Lock 10 (Non MVA) High Band||2.75%|
|Oceanview Life and Annuity||A-||Harbourview 10||3.00%|
|Atlantic Coast Life||B++||Safe Haven 10 - 86-90||2.75%|
|Sentinel Security Life Insurance||B++||Personal Choice Annuity 10 86-90||2.65%|
|Upstream Life||B++||Secure Legacy 10-Year 81+||2.65%|
|Oxford Life Insurance||A-||Multi-Select 10||2.70%|
|Guggenheim Life and Annuity||B++||Preserve MYGA 10 Low Band||3.00%|
|American National Insurance||A||Palladium MYG Annuity 10 High Band||2.55%|
You’ll find Fixed Index Annuity Rates here if you’d like to look at them instead.
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What is a 10 Year Fixed Annuity?
A fixed annuity is essentially a Certificate of Deposit (CD) sold by an insurance company instead of a bank. A seven year fixed annuity pays a guaranteed interest rate for 10 years.
After the 10 year initial guarantee period you will have the option to either renew for another 10 year period at the new declared interest rate, withdraw your annuity account value, convert your annuity to monthly income payments, or transfer to a new annuity using a tax-free 1035 exchange.
As stated above, in addition to providing a guaranteed rate of return for the initial 10-year investment term, 10 year fixed annuities provide the opportunity to turn your savings into lifelong, pension-like income. The fixed annuity rate guarantee is backed by the financial strength of the issuing insurance company.
IMPORTANT NOTE: You have likely heard of a fixed annuity referred to as any of these other names:
Fixed Annuity Definition:
With a fixed annuity, the insurance company guarantees both the rate of return (the interest rate) and the payout to the investor. Although the word “fixed” might suggest otherwise, the interest rate on a fixed annuity can change over time.
The fixed annuity contract will explain whether, how, and when this can happen. For a 10 year fixed annuity, the initial interest rate is fixed for 10 years and a new interest rate is declared at the end of the 10 year contract period.
Source: “Learn to Invest, Investment Types, Annuities, Fixed Annuities.” Financial Industry Regulatory Authority (FINRA). Visit FINRA’s Fixed Annuities Webpage7
Fixed Annuity vs. CDs
Fixed annuities are work very much like a certificate of deposit (CD). Both a fixed annuity and a CD provide principal protection, meaning your account value will not decrease due to market performance.
A fixed annuity, or MYGA, guarantees a set interest rate for a specified period of time – just like a CD. However, Fixed annuity guarantees are backed by the claims-paying ability of the issuing insurance company and are not insured by the FDIC like a CD.
While not FDIC insured, State Insurance Guaranty Associations provide a safety net for their state’s annuity policyholders. These Guaranty Associations guarantee policyholders continue to receive coverage (up to the limits spelled out by state law) even if their insurer is declared insolvent.
Best 5 Year CD Rates
|Financial Institution||APY 5 year||Minimum Deposit|
|Delta Community Credit Union||1.25%||$1,000|
|SchoolsFirst Federal Credit Union||1.01%||$20,000|
|VyStar Credit Union||1.00%||$500|
|First Internet Bank of Indiana||0.96%||$1,000|
|Suncoast Credit Union||0.95%||$500|
|Golden 1 Credit Union||0.90%||$500|
|Navy Federal Credit Union||0.90%||$1,000|
|Randolph-Brooks Federal Credit Union||0.85%||$1,000|
Effective February, 27 2021. Source: Bankrate.com
Calculating Real Rate of Return for CDs
In 18 of the past 30 years, CDs have had a negative return (after taking into account the impact of taxes and inflation), and in three of the positive years, they earned less than a 1% real rate of return.
Have you considered the impact that taxes on interest and adjustments for inflation may have on your overall rate of return? Generally, the interest received in these types of vehicles may not keep pace with inflation. This could mean lower purchasing power for you over time. Also, at renewal, a new rate along with a new withdrawal penalty may apply.
Here’s a quick way to determine your CD’s real rate of return:
Fixed Annuity vs CD Comparison Table
|FIXED ANNUITY||CD (CERTIFICATE OF DEPOSIT)|
|SOLD BY||Insurance Companies||Banks|
|AMOUNT YOU CAN INVEST||$2,000 - $1,000,000||Essentially Any Amount|
|INVESTMENT DURATION||3 years - 10 years||3 months - 5 years|
|INTEREST RATES||Varies by insurer, term and investment amount. Typically higher than CDs||Varies by financial institution, term and investment amount.|
|LIQUIDITY||Varies by insurer and annuity. Usually either 10% of account value or accumulated interest annually.||Almost always accumulated interest.|
|GUARANTEES||Backed by the claims paying ability of issuing Insurer and by State Guaranty Funds.||Backed by the FDIC up to $250,000 per depositor, per institution.|
|DEATH BENEFIT||Asset passed directly to beneficiary without going through the probate process||Probate process required to pass asset to heirs|
Can I Exchange My Annuity for a New 10 Year Fixed Annuity?
The Internal Revenue Service (IRS) allows you to exchange an annuity policy that you own for a new annuity policy without paying tax on the investment gains earned on the original contract. This can be a substantial benefit.
This rule is governed by Section 1035 of the Internal Revenue Code which is why these are called “1035 Exchanges.” Below is a direct link to the complete text of the code.
1035 Exchange Rules
There are a couple of important rules that must be followed in order to receive the benefits of a 1035 Exchange.
- The tax code says that the old annuity policy must be exchanged for a new policy – you cannot receive a check and apply the proceeds to the purchase of a new insurance policy.
- You can 1035 exchange from a life insurance policy to an annuity
- You can 1035 exchange from an annuity to a long-term care policy.
- You can not 1035 exchange from an annuity to a life insurance policy
Here is an example of an actual 1035 Exchange form you would need to complete to move from one annuity to another via a 1035 Exchange.
Advantages of a 1035 Exchange
The primary advantage of using a 1035 exchange to change your life insurance policy or annuity choices is to avoid triggering taxes on those transactions. There are different scenarios where exchanging policies or annuity contracts might make sense. For example, advantages of a 1035 exchange include:
- You need more life insurance coverage than you currently have
- You want to change the type of life insurance policy you have
- You’re looking for an annuity contract with lower fees
- You want to restructure your annuity payments
- You currently own a variable annuity and your risk tolerance has changed
As long as you’re exchanging contracts within the guidelines set by the IRS you all of the above events will be tax-free to you.
How is a Fixed Annuity Taxed?
The deciding factor on how your fixed annuity will ultimately be taxed depends ultimately on the money you used to buy it. Whenever a client asks us how are annuities taxed, our first response is where did you get the money to buy it?
Since we are talking about taxes there is no way to say with certainty exactly how your annuity will be taxed. Tax laws and tax rates can and do change all the time.
However, we can make very educated guesses about certain scenarios based upon how annuities have been and are taxed currently. First, we will look at the types of funds you can use to purchase an annuity and explain the differences in how they are taxed.
Roth IRA Annuity Taxation
If you purchase a fixed annuity with funds from a Roth individual retirement account (IRA) or Roth 401(k) it is very likely you won’t have to pay federal income tax at all on the money when you withdraw it from your annuity. That includes the principal and interest.
Firstly, an annuity purchased with qualified funds is considered a qualified annuity. Qualified funds are monies that you have never paid taxes on such as a traditional IRA or a traditional 401(k). It would be nice if the IRS would allow going from tax-deferred to tax-free but that is not the case.
When you begin to make withdraws from a qualified annuity you will pay normal federal income taxes. Meaning, 100% of your annuity is treated as ordinary income and 100% of the funds will be taxed when they are taken.
Qualified Annuity Taxation
A non-qualified fixed annuity is an annuity purchased with after tax-dollars such as money from a taxable personal savings or checking account or a personal brokerage account.
If you own a non-qualified annuity, you will only pay income tax on the gain in your contract but not the money you used to purchase the annuity. The money used to purchase a non-qualified annuity is considered the “basis”. Insurance companies keep track of your “cost-basis” which is the original amount used to purchase an investment.
This “cost-basis” is the amount of money on which you will not pay taxes because you’ve already taxes on it once. The interest earned will be taxed as ordinary income, with a few exceptions that we will discuss momentarily.
Lifetime Income Annuity Taxation
A 5 year fixed annuity can be converted to an income annuity at the end of the initial 5 year annuity contract period via annuitization.
There are really two types of income annuity payout options: lifetime or period certain. A lifetime annuity is an annuity that guarantees payments for as long as you are alive whereas a period certain annuity guarantees payments for a specified period of time.
Remember, if you own a non-qualified annuity you only pay taxes on the interest earned not the original cost basis. So to determine what portion of your monthly payments are taxable there is a calculation that needs to be done to establish what percent of each annuity is principal (or cost-basis) and what percent is interest earned.
These calculations establish your exclusion ratio, or in plain terms, the percent of each annuity payment that is exempt from income taxes. The method of determining the exclusion ratio varies depending on whether you have a period certain annuity or a lifetime annuity. Let’s look at an example for each.
10 Year Fixed Annuity Buyers Guide
Fixed annuities, or Multi-Year Guarantee Annuities (MYGAs), are the simplest of all annuities making them the easiest variety to shop for and compare. However, there are still a few important items to consider when shopping for the best 10 year fixed annuity rates, other than the guaranteed interest rate.
1. Duration: Typically the longer contract you purchase the higher your guaranteed interest rate will be. But that is not the case, especially given the current inverted yield curve.
2. Liquidity: Most all fixed annuities have some type of annual free withdrawals, but the amount available varies by product. You’ll see most of the fixed annuities at our marketplace provide interest-only withdrawals annually. Others allow for 10% Free Withdrawals (10% of previous years’ account value) annually.
3. Insurance Company’s Financial Rating: It is very important to consider an insurance company’s financial rating because it is an indicator of its ability to fulfill financial commitments to its policyholders. Usually, a lesser-rated insurance company will offer higher fixed annuity rates, but this is not always true.
Pros and Cons of a Fixed Annuity
Fixed Annuity Pros
Fixed annuities are meant to be long-term retirement savings vehicles. They provide a safe, tax-advantaged way to earn a good return on savings needed soon. They are remarkably like CDs, with added benefits:
- Fixed Annuities Provide a Guaranteed Rate of Return
- A Fixed Annuity Grows Tax-Deferred
- A Fixed Annuity Provides Principal Protection
- Fixed Annuities Offer Some Liquidity
- A Fixed Annuity is the Most Simple of All Annuities
Fixed Annuity Cons
- Fixed Annuity Withdrawals Prior to Age 59½ May Have a 10% IRS penalty.
- Fixed Annuities Only Offer Limited Income Options
Fixed Annuity FAQs
Yes. Insurance companies as a whole have a long history of stability, even thru our nation’s most difficult economic times. Fixed annuities are backed by the full faith and credit of the issuing insurance company so it is important to consider the financial strength of an annuity company when purchasing a fixed annuity.
A “CD Type Annuity” is a type of fixed annuity that guarantees a specified interest rate for a set number of years. They are also often referred to as a Multi Year Guaranteed Annuity.
When you purchase an annuity contract you are committing to leave your money there for the duration of your annuity (usually 2 to 10 years). However, most fixed annuities allow taking free withdrawals of interest earned or up to 10% free withdrawals annually (varies by annuity company and contract)
A 10 year fixed annuity is an annuity contract with a seven year surrender charge schedule (CDSC). 10 year fixed annuit rates are locked in for the initial contract period and you agree to keep the annuity for the entire 10 year contract term.
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Annuities are distributed by My Annuity Store, Inc. Guarantees are subject to the claims-paying ability of the insurer. My Annuity Store, Inc. does not advise clients on the purchase of non-fixed annuity products. The information presented here is not of tax or legal nature and is not intended to be a recommendation to purchase a fixed annuity, fixed index annuity, variable annuity contract, registered index-linked annuity (RILA), immediate annuity (SPIA), longevity annuity, or Qualified Longevity Annuity Contract (QLAC).
The contract features described may not be current and may not apply in the state in which you reside. Annuities are issued by Insurance companies and contracts are ‘state-specific. Insurance companies also change their products and information often and without notice. Annuities are subject to the terms and conditions of the specific contract issued by the insurer, are not FDIC or NCUA insured, are not bank guaranteed, may lose value, and are not a deposit. Please call (855) 583-1104 if you have any questions or concerns.
The information presented here is not a representation regarding the suitability of any concept or product(s) for an individual and it does not provide tax, accounting, or legal advice. It is important to read the prospectus carefully and consider your objectives, risks, fees, and charges associated with the contract. You should always consult your own financial planning, tax, and legal counsel to determine if a fixed annuity, immediate annuity, longevity annuity, or Qualified Longevity Annuity Contract are suitable in your financial situation.