What Is a Fixed Annuity?

Every fixed annuity moves through two distinct phases. Understanding both is the foundation for every other decision you'll make about the product.

Fixed annuity rates are usually tied to the contract term. A 3-year annuity may offer one rate, while a 5-, 7-, or 10-year annuity may offer a different one. Longer terms often (but not always) pay higher yields.

Key contract features to compare

• Principal protection. Your original investment is shielded from market downturns.
• Tax-deferred growth. You won't owe taxes on earnings until you withdraw, letting your money compound without annual tax drag.
• Surrender schedule. A surrender charge applies to withdrawals beyond the annual free amount during the surrender period. Schedules vary; some are steep.
• Free withdrawal provisions. Most MYGAs allow up to 10% of account value each year penalty-free.
• Market Value Adjustment (MVA). Adjusts surrender value for early withdrawals based on prevailing rates. Can work for or against you.
• Minimum premium. Some products require $2,500; others start at $25,000 or more.
• Insurer financial strength. Your guarantee is only as strong as the insurer behind it.

How is interest credited?

Most fixed annuities credit compound interest — the interest earned each year is added to your balance and the following year you earn interest on the larger balance. A smaller number credit simple interest, which only earns interest on the original deposit.

$100,000 at 5.90% over 5 years. Compounding produces $3,693 more — a gap that widens significantly over longer terms.

What Affects Fixed Annuity Rates?

Rates are driven by a mix of market conditions, insurer strategy, and product design. The factors below explain why one contract pays 6.50% while another pays 5.20% on the same term.

• Interest rates and Treasury yields. Insurers invest premiums in bonds, so when yields rise, annuity rates rise.
• Contract term length. Longer terms usually pay more, but lock you in longer.
• Insurer pricing strategy. Some carriers compete aggressively on rate; others offer slightly lower yields with stronger ratings.
• Financial strength and risk profile. Lower-rated carriers often lead the rate tables.
• State availability. A contract offered in Florida may not be approved in New York.
• Premium amount. Deposits of $100,000+ typically earn higher tier rates.
• Optional features and liquidity. Enhanced free withdrawals and riders trade base rate for flexibility.

Fixed Annuity Laddering Strategy

One of the smartest ways to maximize your returns while keeping flexibility is through a laddering strategy. Instead of buying a single annuity, you split your investment across multiple contracts with staggered maturities.

A real-dollar example

Jim, age 63, has $150,000 he wants to protect. Instead of locking everything into one 10-year annuity, he splits it into three equal contracts:

When Jim's first annuity matures in 2029, it has grown to roughly $58,600. He can access this money penalty-free and reinvest, while his other two contracts keep compounding tax-deferred.

How to Pick the Right Annuity Company

Fixed annuities are not FDIC insured. Your guarantee is only as strong as the insurer behind it — which makes evaluating the carrier just as important as comparing rates.

1 · Check the AM Best rating

2 · Understand state guaranty coverage

Every state has a guaranty association covering policyholders if an insurer becomes insolvent. Limits typically run $250,000–$500,000 per person, per carrier. If you're investing more than your state's limit with one carrier, consider splitting between two.

3 · Look past the headline rate

The highest rate means nothing if the contract has punishing surrender charges, a harsh MVA formula, or restrictive withdrawal provisions.

Is Now a Good Time to Buy?

Fixed annuity rates sit near 15-year highs. The top MYGA today pays 6.50%, compared to just 2.75% at the 2020 low.

Risk of waiting vs. risk of buying now

What Happens at Maturity?

When your fixed annuity reaches the end of its guarantee period, you typically have four options:

• Renew with the same carrier. Most insurers offer a renewal rate for another term. Watch for automatic 1-year renewals at lower rates if you don't act.
• Transfer via 1035 exchange. Move funds tax-free to a new carrier offering a better rate.
• Take a lump-sum withdrawal. Owe ordinary income tax on the gains; no IRS penalty if you're over 59½.
• Annuitize for lifetime income. Convert to a stream of monthly, quarterly, or annual income payments based on age and account value.

Understanding Surrender Charges

Surrender charges are the trade-off for the higher rates that fixed annuities offer. The carrier guarantees your rate for the full term — and in return, expects your money to stay put.

Who Should Consider a Fixed Annuity?

A fixed annuity may be worth considering if you want guaranteed growth without market risk. The product appeals most to retirees, pre-retirees, and conservative savers who want to protect principal while earning a predictable return.

• Are nearing retirement and want to reduce volatility
• Want a portion of your savings in a guaranteed product
• Are comparing annuities to CDs or bonds
• Want tax-deferred growth
• Don't need immediate access to all of the money
• Value stability over market upside

How We Source Our Rates

My Annuity Store sources its fixed annuity rates through Annuity Rate Watch, a third-party data provider connected via secure API. Rates on this page are refreshed automatically every 6 hours. Insurance companies can change rates at any time, and there may be short delays between an internal rate change and when it appears here. Before purchase, we verify the current rate directly with the carrier.