The Real Truth About Fixed Annuity Rates

You have probably seen the headlines. Highest Fixed Annuity Rates. Top Fixed Annuity Yields. Limited Time Fixed Rate Offers. It sounds exciting, but most of it is either incomplete or flat-out misleading.

Fixed Annuity Rates are not magic; they are math. They are contractual numbers from an insurance company. The problem is not the product; it is how the story is told.

Today, I want to walk you through what Fixed Annuity Rates really are, how they work, and how to compare them without falling for the usual suspects' marketing shenanigans.

What a Fixed Annuity Really Is

Let us start with the basics. A Fixed Annuity is a contract issued by a life insurance company. You give them a lump sum, and in return, they guarantee a specific interest rate or a specific stream of income, depending on the type of Fixed Annuity you choose.

When we talk about Fixed Annuity Rates, we are really talking about Multi-Year Guarantee Annuities, the annuity industry version of a CD. You get a guaranteed rate for a set number of years.

There are no market attachments, no moving parts, no fake upside. Just a contract that says, here is the rate, here is the term.

You own annuities for what they will do, not what they might do. Fixed Annuities fall squarely into the “will do” category.

The Difference Between Real Yield and Marketing Numbers

Here is where a lot of the confusion comes from.

A Multi-Year Guarantee Annuity rate is the real yield. If a carrier says 5 percent for five years, that is a guaranteed interest rate for that full term. Your principal is protected, and the interest either compounds inside the contract or can be taken out, depending on how you set it up.

Now compare that to some of the numbers you see thrown around for Single Premium Immediate Annuities or for income quotes. You might see something like “earn 7 percent” or “get 8 percent income.”

That is not yield. That is not an interest rate. That is just the payout rate, which is a combination of your own money being returned to you plus interest, based on your life expectancy.

So, when companies try to put those numbers side by side with Multi-Year Guarantee Annuity rates, they are mixing categories. One is principal protection with yield. The other is lifetime income with a payout percentage.

Apples and oranges.

Why “Highest Fixed Annuity Rate” Claims Can Mislead You

When you see companies screaming about the highest Fixed Annuity Rate, you need to slow down and read the fine print.

Sometimes that high rate is only available:

• For a very specific term
• In a limited number of states
• With a small issue window
• From a carrier you might not even want to use

In addition, many of those companies do not show you every carrier. At The Annuity Man, we use live feeds to show Multi-Year Guarantee Annuity rates across all available carriers in your state. We do not cherry-pick. We do not show teaser numbers. You see the real grid.

If you are going to chase a rate, at least chase a real one.

What Actually Drives Fixed Annuity Rates

Fixed Annuity Rates are not pulled out of thin air. Carriers are looking at:

• The current interest rate environment
• The duration of the guarantee
• Their own portfolio yield
• Regulatory capital requirements
• How aggressively they want to attract new premium

That is why you will see the longer-term Multi-Year Guarantee Annuity rates move differently than shorter terms. It is also why a five-year Multi-Year Guarantee Annuity might sometimes pay more than a seven-year annuity, and vice versa.

Carriers are managing risk on their side of the ledger. You just need to understand your side.

How To Compare Fixed Annuity Rates the Right Way

If you want to compare Fixed Annuity Rates like a pro, here is what actually matters.

You need to line up:

• Same product type
• Same guarantee period
• Same state of residence
• Similar carrier ratings

Then you can look at:

• The guaranteed rate for the term
• Free withdrawal provisions, if any
• Surrender charge period length
• How interest is credited and taxed
• What happens when the term ends

You do not compare a three-year Multi-Year Guarantee Annuity to a seven-year Multi-Year Guarantee Annuity and pretend that is a fair comparison. You do not compare a lifetime income payout rate to a fixed guaranteed rate and call them the same thing.

You keep it apples to apples.

Red Flags to Watch for When Shopping Rates

There are a few things that should make you stop and take a breath when you are looking at Fixed Annuity Rates online.

If you see talk of:

• Upfront bonus money
• Market upside with no downside
• Guaranteed amount and then a hypothetical “what if” chart
• Complex crediting strategies attached to something that is advertised as “fixed”

That is no longer a plain-vanilla Fixed Annuity. That is probably an Indexed Annuity with moving parts and potential caps, spreads, or participation rates. Nothing wrong with Indexed Annuities when they are properly positioned as Fixed Annuities with limited upside. But that is a different conversation than pure Fixed Annuity Rates.

You came for simple. Make sure you are actually getting simple.

Where Lifetime Income Fits Versus Fixed Rates

This is where people get tangled up.

If you want principal protection and yield, you look at Multi-Year Guarantee Annuities.

If you want guaranteed lifetime income, you look at products like Single Premium Immediate Annuities, Deferred Income Annuities, or Income Riders attached to Indexed Annuities.

When companies mix those together and “compare rates” across that line, they are either confused or they think you will not notice the difference.

You are smarter than that.

How We Do It at The Annuity Man

Here is how it works with us.

You go to The Annuity Man. You click on the Multi-Year Guarantee Annuity section. You enter your state of residence, years guaranteed, and you’ll see a live feed of all available Multi-Year Guarantee Annuity rates for your state.

No one calls you. No one chases you. You can look at those rates all day long, every single day, if you want to.

If you want lifetime income instead of or in addition to principal protection, you can run Single Premium Immediate Annuity quotes, Deferred Income Annuity quotes, or Income Rider quotes the exact same way. Again, no one calls you unless you ask us to. When you do schedule a call, we call you exactly when you requested, we answer your questions, and you make the decision on your terms and on your timeframe.

The Bottom Line on Fixed Annuity Rates

Fixed Annuity Rates are not mysterious. They are contractual guarantees.

You do not buy an annuity because of a commercial. You do not buy an annuity because of a bonus or a slogan. You buy an annuity because the contract solves a specific problem for you, using math, not hope.

You own annuities for what they will do, not what they might do. Fixed Annuity Rates are part of that “will do” conversation, and when you understand the truth behind them, you will never fall for headline bait again.