Best 5 Year Fixed Annuity Rates (MYGA) 2021

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Fixed Annuity Buyers Guide

In this guide, we’ll explain what a fixed annuity, how they work, fixed annuity taxation, current annuity rates, the pros and cons, and how to buy a fixed annuity online.  

Today's 5 Year Fixed Annuity Rates

As of May 1st, 2021, the SILAC Secure Savings Elite has the best 5 year fixed annuity rate at 2.95%.

Fixed Annuity CompamyAM BestFixed AnnuityRate
SILACB+Secure Savings Elite 52.95%
Western United Life B+Navigator Ultra MVA2.90%
Nassau Life and Annuity CoB+Nassau MYAnnuity 5 0% Free2.80%
SILACB+Secure Savings Elite 5 (FL)2.80%
Sentinel Security LifeB++Personal Choice Annuity 52.80%
Upstream LifeB++Secure Legacy 5 Year2.75%
Upstream LifeB++Secure Legacy 5-Year NV2.70%
SILACB+Secure Savings 52.70%
Sentinel Security LifeB++Personal Choice Annuity 5 (CA, FL)2.70%
Nassau Life and Annuity CoB+Nassau MYAnnuity 5X 10%/Free2.60%
Atlantic Coast LifeB++Safe Haven 52.60%
Upstream LifeB++Secure Legacy 5-Year 81+2.55%
Fidelity & Guaranty LifeA-FG Guarantee-Platinum 52.55%
Royal Neighbors of AmericaA-Choice 52.50%
Atlantic Coast LifeB++Safe Haven 5 FL2.50%
Guaranty Income Life (GILICO)B++Guaranty Rate Lock 5 ($250K+)2.50%
Global AtlanticASecureFore ($100K+)2.50%
Sentinel Security LifeB++Personal Choice Annuity 5 86-902.45%
Oceanview Life and AnnuityB++Harbourview 52.55%
Oxford LifeA-Multi-Select 52.45%

You’ll find Fixed Index Annuity Rates here if you’d like to look at them instead.

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Today's Best Fixed Annuity Rates by Term

TermInsurerRatingFixed AnnuityRate
2 yrsSILACB+Secure Savings Elite 22.15%
3 yrsOceanview Life and Annuity CompanyA-Harbourview 32.20%
4 yrsNassau Financial GroupB+Nassau Simple Annuity2.55%
5 yrsWestern United LifeB+Navigator Ultra 3.00%
6 yrsAtlantic Coast LifeB++Safe Haven 62.87%
6 yrsOceanview Life and Annuity CompanyA-Harbourview 62.75%
7 yrsWestern United LifeB+Navigator Ultra 3.05%
8 yrsOxford Life InsuranceA-Multi-Select 82.80%
9 yrsLiberty Bankers LifeB++Bankers Elite 93.00%
10 yrsGuggenheim Life and Annuity ($250K+)B++Personal Choice Annuity 103.10%
10 yrsGuggenheim Life and Annuity B++Personal Choice Annuity 103.00%

Best Fixed Annuity Companies 2020

Each year the Secure Retirement Institute publishes total U.S. Individual Annuity Sales and breaks out the results for the top 20 Insurance Companies. 

The table below lists the top 10 fixed annuity companies in order by the dollar amount of 2020 individual U.S. fixed annuity sales in thousands. So for instance, New York Life’s total fixed annuity sales were $6.78 Billion in 2020.

Insurance CompanyA.M. Best
Rating
Comdex
Score
2020 Fixed
Annuity Sales
New York LifeA++100$6,787,935
Massachusetts Mutual LifeA++98$5,393,216
AIG CompaniesA82$3,565,230
Global Atlantic Financial GroupA75$3,432,954
Western Southern GroupA+96$2,035,737
MetLifeA+95$2,010,519
Symetra FinancialA82$1,932,348
Pacific LifeA+93$1,183,891
Great AmericanA82$995,922
Principal Financial GroupA91$511,488

What is a Fixed Annuity?

A fixed annuity or multi-year guaranteed annuity (MYGA)  is a type of tax-deferred retirement savings account that pays a guaranteed interest rate for a set period of time. Fixed annuities are often compared to Certificates of Deposit (CDs) and sometimes referred to as a “CD Type Annuity” because of the many similarities. Essentially, a fixed annuity is a CD sold by an insurance company instead of a bank.  

One key difference is that the earnings from a fixed annuity are not taxed until you withdraw your money; whereas CD interest is taxed in the year it is earned – regardless if you spend it.

NOTE: You may also hear a fixed annuity referred to as one of these names:

    • CD type annuity
    • Multi-Year Guaranteed Annuity (MYGA)
    • Single-Premium Deferred Annuity (SPDA)
    • Traditional Fixed Annuity
    • Flexible-Premium Deferred Annuity (FPDA)

How Does a Fixed Annuity Work?

With a fixed annuity, the insurance company guarantees both the rate of return (the interest rate) and the payout to the investor. The specified interest rate is set upfront and so is the length of the contract. For instance, a 5 year fixed annuity rate of 3.10% interest rate will pay 3.10% for 5 years guaranteed. 

At the end of your initial guarantee period, you will be offered a new interest rate which is called a renewal rate. You will typically have a 30-day window to decide whether or not you want to accept the renewal rate or transfer your money somewhere else. You are able to transfer to a new annuity without any tax consequences using a 1035 exchange.

Source: “Learn to Invest, Investment Types, Annuities, Fixed Annuities.”  Financial Industry Regulatory Authority (FINRA).  Visit FINRA’s Fixed Annuities Webpage

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 InstitutionAPY 5 yearMinimum Deposit
Delta Community Credit Union1.25%$1,000
SchoolsFirst Federal Credit Union1.01%$20,000
VyStar Credit Union1.00%$500
First Internet Bank of Indiana0.96%$1,000
Suncoast Credit Union0.95%$500
Golden 1 Credit Union0.90%$500
Navy Federal Credit Union0.90%$1,000
Comenity Direct0.90%$1,500
Ally Bank0.85%$0
Randolph-Brooks Federal Credit Union0.85%$1,000

Effective February, 27 2021. Source: Bankrate.com

Fixed Annuity vs CD Comparison Table

 FIXED ANNUITYCD (CERTIFICATE OF DEPOSIT)
SOLD BYInsurance CompaniesBanks
AMOUNT YOU CAN INVEST$2,000 - $1,000,000Essentially Any Amount
INVESTMENT DURATION3 years - 10 years3 months - 5 years
INTEREST RATESVaries by insurer, term and investment amount. Typically higher than CDsVaries by financial institution, term and investment amount.
LIQUIDITYVaries by insurer and annuity. Usually either 10% of account value or accumulated interest annually.Almost always accumulated interest.
GUARANTEESBacked 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 BENEFITAsset passed directly to beneficiary without going through the probate processProbate process required to pass asset to heirs
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Can I Exchange My Annuity for a New 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.

U.S. Code > Title 26 > Subtitle A > Chapter 1 > Subchapter O > Part III > Section 1035

 

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.  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. 

Annuity Ladder

2 Yr Annuity3 Yr Annuity4 Yr Annuity5 Yr Annuity6 Yr Annuity5 Yr Annuity5 Yr Annuity5Yr Annuity5 Yr Annuity5 Yr Annuity
2.15%2.25%2.55%3.00%2.87%3.20%3.40%3.60%3.60%3.60%
$100,000 $100,000 $100,000 $100,000 $100,000
$102,150 $102,250 $102,550 $103,000 $102,287
$104,346 $104,551 $105,165 $106,090 $105,223 $104,346
$106,903 $107,847 $109,273 $108,243 $107,685 $106,903
$110,597 $112,551 $111,349 $111,131 $110,538 $110,597
$115,927 $114,545 $114,687 $114,296 $114,578 $115,927
$117,832 $118,357 $118,182 $118,703 $120,100 $117,832
$122,145 $122,200 $122,977 $124,424 $122,074
$126,355 $127,404 $128,903 $126,469
$131,990 $133,544 $131,021
$138,351 $135,738
$140,625

Things to Consider When Buying a Fixed Annuity

Fixed annuities are the most simple of any annuity which also makes them the easiest to shop for.  Below are a few features to consider other than the interest rate when you are considering a fixed annuity.

Duration: Typically the longer contract you purchase the higher your guaranteed interest rate will be. However, that is not always the case in today’s low-rate environment.

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 either:

Interest-only withdrawals annually, or 10% Free Withdrawals (10% of the previous years’ account value) annually. 

Insurance Company’s Financial Rating: Insurance companies are assigned financial ratings by independent rating agencies and these ratings are very important to consider because they are an indicator of its ability to fulfill financial commitments. Usually, a lesser-rated insurance company will offer higher fixed annuity rates, but that is not always the case.

How are fixed annuities taxed? Roll of 100 dollar bills and blue glass globe sitting on desk with the text

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. 

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 

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.

Non – Qualified

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-basiswhich is the original amount used to purchase an investment. 

Lifetime Income Annuity 

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.

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.

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Fixed Annuity Pros and Cons

Advantages of a Fixed Annuity

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

Fixed annuities offer a set interest rate for the entire length of the contract term

A Fixed Annuity Grows Tax-Deferred

As a retirement savings vehicle fixed annuities receive preferential tax treatment from the IRS. Taxes on interest earned are not paid until distributions are made. For a fixed annuity, this means that interest will accumulate and compound without incurring annual taxes, as is the case for a CD.

Fixed Annuities Provide Principal Protection

Fixed Annuities offer a safe and steady way to grow your retirement savings protecting them from loss due to market fluctuations.

Fixed Annuities Provide Some Liquidity

Most fixed annuities provide some liquidity in the form of annual free withdrawals. The free withdrawal amount is often either interest earned or 10% of the previous year’s account value (if you are over age 59 1/2. 

Fixed Annuities are Simple Products

Some types of annuities such as fixed index and variable are highly customizable with many options from which to choose. Fixed annuities are very simple and easy to understand and don’t offer additional riders for a fee.

Disadvantages of a Fixed Annuity

10% IRS Penalty on Withdrawals from a Fixed Annuity Made Before Age 59½

Fixed annuities are really meant to be used for retirement savings. The IRS issues a 10% penalty on gains withdrawn from a fixed annuity for account holders under age 59½.

A Fixed Rate Annuity Offers Few Income Options

To be classified as an annuity an insurance product must contractually guarantee the ability to convert your contract into a lifetime income.

However, a fixed annuity is definitely the least expensive or most efficient annuity product to generate a lifetime income; they simply have guaranteed annuitization rates built into them. Most often we find new money rates are better than the annuitization rates built into an existing annuity.

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)

There are no fees for any of the fixed annuities listed on this page and, in general, fixed annuities do not have any fees. However, there are some fixed annuity products that offer optional income riders, death benefit riders, or long term care riders for an additional annual fee.

A 5 year fixed annuity is an annuity contract with a 5 year surrender charge schedule (CDSC). 5 year fixed annuit rates are locked in for the initial 5 year annuity contract period and you agree to keep the annuity for the 5 year contract term.

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