Best Annuity Rates in Vermont
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.
Key Takeaways
- High top rate makes deferral powerful: Vermont’s top income tax rate is 8.75%, among the highest in New England. Every year of tax-deferred growth in an annuity delays a real, significant tax bill and keeps more money compounding.
- No broad retirement income exclusion: Unlike some neighboring states, Vermont does not offer a general pension or annuity exclusion for retirees. Distributions from non-qualified annuities and IRA annuities are taxed as ordinary income at full VT rates.
- Social Security partial exemption: Vermont exempts Social Security for single filers with income under $45,000 and joint filers under $60,000. Above those thresholds, the federal inclusion rules apply, and Social Security income can be partially taxed at state rates.
- Standard guaranty protection: Vermont’s guaranty association covers annuity contracts up to $250,000 per insurer, the national standard. Buyers with larger assets should consider spreading purchases across two well-rated carriers.
- Bracket management is the key strategy: Because VT applies full rates to annuity income with no exclusion, timing your withdrawals to land in the 3.35% or 6.6% brackets, rather than the 8.75% top bracket, can save thousands per year.
Vermont Department of Financial Regulation
The Vermont Department of Financial Regulation (DFR) oversees insurance carriers and agents doing business in Vermont, including annuity products. The DFR’s insurance division handles consumer complaints, agent license verification, and carrier solvency oversight.
| Contact | Details |
|---|---|
| Agency | Vermont Department of Financial Regulation (DFR) |
| Consumer helpline | 802-828-3301 |
| Website | dfr.vermont.gov |
| License verification | dfr.vermont.gov/insurance/agents-brokers |
How Vermont Taxes Annuity Income
Vermont taxes annuity distributions as ordinary income at graduated state rates up to 8.75%. There is no special exclusion for annuity or pension income, the full withdrawal amount is exposed to VT’s rate schedule, making it one of the more tax-heavy New England states for retirees drawing down retirement savings.
| Annuity Type | Vermont Tax Treatment | State Rate |
|---|---|---|
| MYGA / Fixed Annuity distributions | Taxed as ordinary income; no special exclusion applies | 3.35% – 8.75% |
| Interest earnings (non-qualified) | Tax-deferred during accumulation; taxed at withdrawal as ordinary income | 3.35% – 8.75% |
| IRA/401(k) annuity distributions | Fully taxable as ordinary income; no pension exclusion in Vermont | 3.35% – 8.75% |
| Social Security | Exempt for income under $45,000 (single) / $60,000 (MFJ); partially taxed above those thresholds | 0% – 8.75% |
Margaret, 64, lives in Burlington and spent 25 years as a school administrator, she funded a multi-year guaranteed annuity with proceeds from a CD that matured, knowing every year of tax deferral saves her real money at Vermont’s top rate of 8.75%. Vermont is a high-tax state with no broad retirement income exclusion, which makes the tax-deferred growth inside an annuity especially valuable for residents managing their bracket exposure year by year.
Tips for Buying an Annuity in Vermont
- Time your withdrawals to manage your Vermont tax bracket: Vermont’s income brackets run from 3.35% (up to $45,525 single) to 8.75% (over $213,150 single). If you can keep annual annuity withdrawals within the 6.6% bracket rather than triggering the 8.75% rate, the savings are real. Review current fixed annuity rates alongside your projected income before deciding how much to annuitize each year.
- Consider a MYGA before rates shift: With Vermont offering no retirement income exclusion, the compounding power of a MYGA’s tax-deferred growth is amplified. Every year your interest stays inside the annuity is a year it avoids Vermont’s 8.75% top rate, and compounds on the full pre-tax balance instead.
- Monitor your Social Security threshold carefully: Vermont’s Social Security exemption phases out once your income exceeds $45,000 (single) or $60,000 (MFJ). Adding a large annuity withdrawal in the same year can push you over that threshold and trigger state tax on your Social Security income too. Model out the combined effect before taking distributions.
- Understand your guaranty association protection: Vermont’s state guaranty association protects up to $250,000 per insurer. If you’re investing $300,000 or more, splitting between two highly-rated carriers is a practical way to keep the full amount covered. Learn how to buy an annuity for a step-by-step overview of the process.
- Get competing quotes, rates move weekly: Don’t lock in the first rate you see. Request a free quote to compare current top rates available to Vermont residents across multiple A-rated carriers. Even a small rate difference compounds meaningfully over a 5- or 7-year term in a state where every dollar of interest you defer is worth more because of Vermont’s high ordinary income tax rate.
Frequently Asked Questions
Does Vermont tax annuity withdrawals?
Yes. Vermont taxes annuity distributions as ordinary income at graduated rates from 3.35% up to 8.75%, depending on your total income. Vermont does not offer a special pension or annuity exclusion for retirees, so the full withdrawal amount is subject to state income tax in the year it is received.
What is the guaranty association limit in Vermont?
Vermont’s guaranty association protects annuity contracts up to $250,000 per insurer. This is the standard national limit. The protection applies if a licensed Vermont carrier becomes insolvent, but it is not a government guarantee, it is funded by the insurance industry. Choosing carriers with AM Best ratings of A or better provides an additional layer of security.
Is Social Security exempt from Vermont income tax?
Partially. Vermont exempts Social Security benefits for single filers with income under $45,000 and joint filers under $60,000. Above those thresholds, Vermont follows the federal inclusion rules, meaning up to 85% of your Social Security benefit may be included in taxable income and taxed at Vermont’s ordinary rates.
Does Vermont have a pension exclusion that applies to annuities?
No. Vermont does not have a broad pension or retirement income exclusion. Some neighboring New England states (like Massachusetts for public pensions) offer partial exemptions, but Vermont applies its full ordinary income tax rates to annuity and IRA distributions without a general exclusion. This makes tax-deferred accumulation inside an annuity especially valuable for Vermont residents.
Compare Annuity Rates in Other Northeast 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 New Hampshire
- Best Annuity Rates in Washington D.C.
- Best Annuity Rates in New Jersey
- Best Annuity Rates in Maine
- Best Annuity Rates in Massachusetts
- View All 50 State Rate Pages
You can also compare our current best fixed annuity rates or explore top 5-year MYGA rates nationwide.
