Are Fixed Annuity Rates Going Up?

Are Fixed Annuity rates going up?

Good question.

But before answering that, you need to understand something.

There is not just one “rate” in the annuity world.

There are really three different things people might be talking about:

• Interest rates
• MYGA rates
• Lifetime income payout rates

And they are not the same thing.

Key Takeaways

• Interest rates and annuity rates are not the same thing
• MYGA rates are guaranteed contractual rates
• CDs follow the Fed more directly than MYGAs
• MYGA pricing comes from multiple life insurance company pricing levers
• Lifetime income payout rates are based primarily on life expectancy
• Artificial intelligence and medical breakthroughs may eventually lower payout rates

Interest Rates Are Not Annuity Rates

Everyone wants to talk about the Fed.

“What’s the Fed going to do?”

“Are rates going higher?”

“Are rates going lower?”

Let me tell you something.

Nobody knows.

If you really knew where interest rates were going, you’d be on a Learjet trading interest rate futures and you wouldn’t be talking to anybody.

The Fed matters.

But it does not determine everything in the annuity world.

MYGA Rates Are Different From CD Rates

A Multi-Year Guarantee Annuity, or MYGA, is the annuity industry’s version of a CD.

It provides a guaranteed interest rate for a specific period of time.

That rate is contractual.

You can lock it in.

But MYGAs do not price exactly like CDs.

CDs look directly at the Fed.

MYGAs glance at the Fed.

That’s a big difference.

Life insurance companies use more than one pricing lever when setting MYGA rates.

What Drives MYGA Rates?

MYGA rates can be affected by:

• Interest rates
• The carrier’s bond portfolio
• Life insurance company pricing needs
• Competitive pressure
• The company’s desire to attract deposits

That’s why you can’t just say, “The Fed did this, so MYGA rates will do that.”

It’s not that simple.

Are MYGA Rates Going Up?

Maybe.

This is the honest answer.

I think it’s close to fifty-fifty, but I lean toward annuity-type rates moving higher because life insurance companies want customer money.

There are thousands of people turning 65 every day, and annuity companies want to attract that demographic tidal wave.

That means carriers may raise rates to compete for business.

But no one knows for sure.

Lifetime Income Payout Rates Are Different

Now let’s talk about another kind of rate.

The payout rate.

When you look at lifetime income products like:

• Single Premium Immediate Annuities
• Deferred Income Annuities
• Qualified Longevity Annuity Contracts
• Income Riders

The payout rate is a mathematical reflection of your life expectancy or joint life expectancy.

That is not the same as an interest rate.

Why Payout Rates Could Go Lower

This is where artificial intelligence comes in.

AI is shortening the timeline for medical breakthroughs.

GLP-1 medications are changing health and weight outcomes.

If people live longer, life expectancy tables expand.

And when life expectancy tables expand, lifetime income payments can go lower.

That means payout rates may eventually move against you.

Don’t Confuse Payout Rate With Yield

This is important.

A payout rate is not yield.

If someone says, “You’re getting a 7.8 percent SPIA,” that does not mean you are earning 7.8 percent.

That is the payout rate.

Not yield.

That distinction matters.

Why You Still Shop All Carriers

Annuities are commodity products.

Carriers compete for your business.

One company might need people in your age range.

Another might not.

That’s why the best answer is not trying to predict rates.

The best answer is comparing what is actually available right now.

What You Should Do Next

Instead of trying to time the Fed, the better question is:

What guaranteed rate or income payout is available for your situation right now?

That’s something you can compare across carriers using our annuity calculators here: https://www.stantheannuityman.com/ annuity-calculator/

The Bottom Line

Are Fixed Annuity rates going up?

Maybe.

But you have to define which rate you mean.

• Fed interest rates may go one direction
• MYGA rates may go another
• Lifetime income payout rates are driven mainly by life expectancy

Do not try to time it perfectly.

Shop all carriers.

Compare contractual guarantees.

Then decide based on what the contract will do.