Annuity Rates Today in Tennessee
Tennessee is one of the best states in the country to own an annuity, full stop. Since the Hall Income Tax was eliminated in 2021, the state collects zero income tax on wages, pensions, or annuity distributions. Every dollar you withdraw from a fixed annuity is yours to keep at the state level. Combined with Nashville’s growing retiree migration and a competitive carrier market, Tennessee residents have real options in 2026.
Nancy, 66, is a retired Nashville healthcare administrator rolling over $320,000 from her 401(k). She’s looking at the 7-year fixed annuity market and eyeing a 5.75% rate. Over seven years, that $320,000 grows to approximately $480,000, and not a penny of that growth is owed to Tennessee in state income tax. The only tax she’ll pay on withdrawals is federal.
Best Annuity Rates in Tennessee: 2026 Rate Table
The rates below reflect top offers from A-rated carriers currently available to Tennessee residents. These are MYGA (multi-year guaranteed annuity) rates, fixed for the full contract term with no market risk to principal.
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.
A multi-year guaranteed annuity is the annuity equivalent of a CD, except the rates are typically higher and the earnings grow tax-deferred until you withdraw. For Tennessee residents, the absence of state income tax makes the comparison with CDs even more favorable. Check our current fixed annuity rates to see which carriers are leading the market today.
How Tennessee Regulations Affect Your Annuity Rate
Tennessee charges insurance carriers a premium tax of 1.75% on annuity premiums collected in the state. That’s higher than Indiana (1.3%) but lower than states like New York or California, and it sits near the national average. Carriers building their rate offers factor this cost in, so Tennessee rates are generally competitive but not the absolute highest in the country.
The Tennessee Department of Commerce and Insurance (TDCI) oversees annuity regulation in the state. TDCI licenses all agents, reviews and approves annuity products before they can be sold, and enforces suitability standards. Tennessee follows the NAIC model regulation on suitability, so your agent is required to document how the recommended product fits your income, assets, and retirement goals before completing a sale.
The booming retirement migration into Nashville and the broader Tennessee market has increased carrier activity in the state. More insurers competing for Tennessee premiums generally keeps rates from lagging behind national leaders. If a carrier isn’t offering competitive rates in Tennessee, they risk losing volume to competitors who are.
Your Tennessee contract includes a 10-day free look period. Sign the contract, receive it in the mail, and you still have 10 full days to review and cancel for a complete refund of the premium. That window is your opportunity to compare the actual contract terms against what your agent quoted.
Tennessee Life and Health Insurance Guaranty Association
The Tennessee Life and Health Insurance Guaranty Association (TLHIGA) protects Tennessee annuity owners if a licensed insurance company fails. The coverage limit is $250,000 in present value per annuity owner, per insolvent insurer.
Coverage is automatic, you don’t apply for it, and there’s no premium. Any annuity purchased from a carrier licensed in Tennessee is covered up to the limit. If the carrier becomes insolvent, TLHIGA steps in to continue contract benefits or transfer the policy to a solvent carrier, up to the $250,000 threshold.
The $250,000 limit is per carrier, not per person overall. If you hold policies with two different companies and each is under $250,000, both are fully covered. Nancy’s $320,000 rollover is a perfect example of where splitting matters: $160,000 with Carrier A and $160,000 with Carrier B keeps both well inside the coverage limit.
Our guide to state guaranty associations explains how the network operates across all 50 states and how to verify whether your current carrier is covered. The guarantee is real, but it has limits, which is why we only work with carriers rated A- or better by AM Best.
Annuity Tax Treatment in Tennessee
Tennessee has no state income tax on wages, salaries, pension income, or annuity withdrawals. The Hall Income Tax, which previously applied to investment income like dividends and interest, was phased out entirely effective January 1, 2021. Tennessee now has one of the most tax-friendly environments for retirees anywhere in the country.
What this means for Nancy: every dollar she withdraws from her 7-year fixed annuity is subject only to federal income tax. For a qualified annuity (funded through a 401(k) rollover), withdrawals are 100% taxable at the federal level as ordinary income. For a non-qualified annuity (funded with after-tax dollars), only the earnings portion of each withdrawal is federally taxable, the return of principal is not.
Nancy’s 401(k) rollover becomes a qualified annuity. Her RMDs beginning at age 73 will be fully taxable federally, but she’ll owe nothing to Tennessee on any of it. If she’s in the 22% federal bracket, a $40,000 annual withdrawal costs her $8,800 in federal tax, and zero in state tax. A resident of California in the same situation would also owe California’s 9.3% marginal rate on the same distribution, adding $3,720.
The tax advantage compounds over time inside the annuity. Gains in a deferred annuity aren’t taxed annually, they grow without drag until withdrawal. In a state with no income tax, even a taxable brokerage account has limited state-level advantage over an annuity, but the federal tax deferral alone makes the annuity structure attractive for long-term accumulation.
How to Buy an Annuity in Tennessee: Step by Step
- Clarify your objective. Nancy’s goal is straightforward: lock in a guaranteed rate on a 401(k) rollover and defer federal income tax until she needs distributions. A 7-year MYGA at 5.75% achieves both. If your goal is lifetime income rather than accumulation, a different structure, such as an income annuity, may be more appropriate. Knowing your goal before you shop prevents you from buying the wrong product.
- Shop at least three A-rated carriers. Even on the same term, carrier rates vary. The difference between 5.50% and 5.75% on a $320,000 premium is $800 per year in interest. Over seven years with compounding, that gap becomes nearly $6,000. Use the current fixed annuity rates to compare top offers side by side.
- Confirm the rollover mechanics before signing. For a 401(k) rollover, the money should move directly from the 401(k) custodian to the annuity carrier, a direct trustee-to-trustee transfer. If the check is made payable to Nancy instead of the carrier, she has 60 days to complete the rollover, or it becomes a taxable distribution. Ask both the 401(k) plan and the annuity carrier to confirm the direct transfer process before submitting anything.
- Review liquidity provisions. Most MYGAs allow penalty-free withdrawals of up to 10% of account value per year during the surrender period. Nancy should plan her income needs carefully, if she expects to need more than 10% in any given year, she may want a shorter term or a ladder of multiple contracts. Our guide on how to buy an annuity covers surrender charge structures in detail.
- Apply, fund, and review your contract. Once you’ve selected a carrier, your agent or an online application at My Annuity Store initiates the process. Applications are typically reviewed and contracts issued in 7–10 business days. When your contract arrives, the 10-day free look clock starts. Read every page, verify the rate, term, and beneficiary designations before the free look expires.
Frequently Asked Questions About Annuities in Tennessee
Does Tennessee tax annuity withdrawals?
No. Tennessee eliminated the Hall Income Tax in 2021 and now has no state income tax on any form of income, including annuity withdrawals. Tennessee residents only owe federal income tax on annuity distributions. This makes Tennessee one of the most favorable states in the country for annuity income in retirement.
What is the guaranty association coverage limit in Tennessee?
The Tennessee Life and Health Insurance Guaranty Association covers annuity contracts up to $250,000 in present value per annuity owner, per insolvent insurance company. If you have more than $250,000 to invest, consider splitting the premium between two A-rated carriers to keep each contract within the coverage limit.
Should I roll my 401(k) directly into an annuity in Tennessee?
A direct rollover from a 401(k) to an annuity IRA is tax-free at the time of transfer. You preserve the tax-deferred status of the funds and begin earning the annuity’s guaranteed rate immediately. The alternative, taking a distribution and redepositing within 60 days, creates withholding and timing risk. Always request a direct trustee-to-trustee transfer.
How do Tennessee annuity rates compare to CD rates?
As of March 2026, the top 5-year MYGA rates in Tennessee from A-rated carriers are running at 5.60%, while the national average 5-year CD rate is closer to 4.2%–4.5%. The annuity also has one structural advantage the CD lacks: earnings grow tax-deferred until withdrawal, not just tax-free at the state level. For money you don’t need to touch for five or more years, the annuity comparison is favorable.
Compare Annuity Rates in Other Southeast States
Shopping for the best rate? Guaranty association limits, premium taxes, and available carriers vary by state. Compare rates in nearby states to find the best fit for your retirement plan.
- Best Annuity Rates in Virginia
- Best Annuity Rates in Kentucky
- Best Annuity Rates in South Carolina
- Best Annuity Rates in Oklahoma
- Best Annuity Rates in Florida
- View All 50 State Rate Pages
You can also compare our current best fixed annuity rates or explore top 5-year MYGA rates nationwide.
