Any type of life insurance policy or investment annuity has interest rates that affect the profit you can make from your investment.

Let’s take a closer look at what annuity rates are, how fixed annuity rates work, and the best fixed annuities in 2023.

What is an Annuity?

One of the questions we see the most often is, What is an annuity? An annuity is a contract made between an individual and an insurance company. The person taking out the annuity agrees to invest a specific sum, either a lump sum or a series of smaller payments.

The annuity provider, in turn, pledges to repay the individual through a series of consistent payments after a certain timeframe. During the timeframe that the annuity is active, it accrues interest which the insurer will add to the payments the individual receives at the agreed-upon time.

Depending on the type of annuity contract, the payments may continue for:

  • A pre-determined and agreed-upon period of time (usually a maximum of up to 10 years)
  • The remaining lifetime of the individual, or the individual and their spouse

Now that you’re familiar with the basics of annuities, let’s discuss annuity rates.


What is an Annuity Rate?

Annuity rates are the percentage by which your annuity grows every year. Depending on the insurance company in question, and the type of policy, you can have one of several types of annuity.

Types of Annuity Rates

Typically, annuity rates are divided into the following main categories:

  • Fixed annuities – As their name suggests, fixed annuities offer a fixed interest rate on any contributions to the account
  • Fixed indexed annuities – Fixed index annuity rates change based on changes to a fixed market index. The market value adjustment may be attached to the Dow Jones Industrial Average, for instance, or the JCSE.
  • Variable annuities – These are the most common type and have an interest rate that changes regularly.

Fixed Annuity Rates: Pros and Cons

Fixed annuities are a type of deferred annuity that can seem like an obvious choice thanks to their guaranteed interest rate. However, as with anything, there are both advantages and disadvantages to this kind of investment. Below, we’ll point out some of the top pros and cons.

Advantages of Fixed Annuities

There are many advantages to choosing a fixed annuity over variable annuities. They include the following:

  1. Guaranteed Income – Thanks to the fixed interest rates, you can rely on the same annuity rates for March, June, or September. It’s a guaranteed source of income because the insurance company is legally bound to keep paying your fixed annuity.There’s only one reason why an insurance company might not pay, and that’s bankruptcy. If the company goes out of business, it naturally can’t pay you.
  2. Guaranteed Returns – With a fixed annuity, you don’t have any concerns about fluctuating interest rates, irrespective of the state of the market. The fixed interest rates mean you’ll always receive your due profits.
  3. Tax Deferral – All annuities, including deferred income annuities and variable annuity options, are tax-deferred. That means that your fixed annuities are completely tax-deferred.
    You’ll only start paying tax when you start making withdrawals from the account. Additionally, your tax responsibilities will be based on an exclusion ratio.
  4. Low Investment Requirements – Your average insurance company will allow you to get into fixed annuities at low minimum investment rates. Accordingly, these annuities are more affordable than many other investment types.
  5. The Payout Options Are Flexible – Possibly one of the greatest advantages of this type of deferred annuity is the fact that the payout options are so flexible. The flexibility extends toward the following:
    • Payout Timing – There are several options for withdrawing from your annuity. You can start making withdrawals immediately, or you can wait till some point in the future. You can also consider options like the longevity annuity, which takes a part of your retirement lump sum and invests it for your old age.
    • Payout Length – Once you start making withdrawals from your annuity, you can choose how long you want to withdraw from it. Some of the most common options are:
      • Lump sum – You can typically choose to withdraw your entire annuity as a lump sum. However, you may be liable for surrender charges or another type of fee if you withdraw it early.
      • Straight life – This plan allows you to make withdrawals for as long as you live.
      • Joint life – This plan allows you and your spouse to make withdrawals for the extent of your lives
    • Period Guarantees – If you use a straight life or joint life withdrawal technique, you place your annuity at risk. It means that if you (or you and your spouse) die soon after starting withdrawals, your family loses the entire annuity.

However, a period guarantee allows your beneficiaries to withdraw from the annuity for a certain amount of time after you pass away.

Disadvantages of Fixed Annuities

As with any product, this type of deferred annuity policy has certain disadvantages. Namely, you may encounter the following:

  1. No basis step up – As mentioned above, annuities are taxed deferred. The means for calculating your tax liability is by calculating your long-term capital gains (the difference between the sale price and the original purchase price, also known as your basis).With most types of investment, your beneficiaries inherit the basis of the investment’s market price when you die. However, for fixed annuities, your beneficiaries inherit the basis of your initial purchase price. This means that all the gains you accumulated during your lifetime are fully taxable.
  2. Little Protection Against Inflation – While a fixed interest rate has certain advantages, it doesn’t compensate for inflation. At the time you take out the policy, a 5% interest rate can seem fantastic. However, 30 years later, the interest rate and cost of living will have increased to such an extent that the same sum will have considerably less practical value.
  3. Fixed Annuity Fees – All insurance policies have some built-in fees, but it often seems that fixed annuities have more than most. Some of the fees you may be liable for include the following:
    • Surrender Charges – Typically, a life insurance company will require a surrender fee if you surrender your policy within a certain timeframe (before it reaches fruition). Surrender charges typically decrease as the life of your policy nears its end.
    • M&E Charges – Mortality, expense, and administration fees are also par for the course. However, they’re typically a standardized part of the annuities, which you agree to at the beginning of the annuity. For instance, they may charge a 1% fee, meaning you may only receive 3% annually of a 4% return.
    • Commissions – Annuities are generally sold as commission products. This means that there’s usually a commission fee involved, which you’ll need to account for. How this happens varies according to the annuity company in question, but be sure to account for this when taking out a policy.

What Are the Best Fixed Annuity Rates for May 2023?

There are many different fixed annuity contract types. While traditional fixed annuities guarantee your interest rate from the beginning, you still need to choose the right product for your needs.

MYGAs, or Multi-Year Guaranteed Annuities, are probably one of the best types of fixed annuities, and almost every annuity company offers them. They typically only offer the guaranteed interest rate for a specific timeframe (often between a year and a decade). You’ll generally be liable for a surrender charge if you make a withdrawal before the end of that timeframe.

It’s worth noting that the rates for this type of policy change regularly. Yes, you get a guaranteed minimum rate and interest rate when you sign up. But someone signing up a month from now may get an entirely different rate. That’s why the Annuity rates for March can differ significantly from those for May of the same year.

Let’s take a closer look at some of the best fixed annuity rates in May 2023.

Fixed annuities on laptop

Two-Year Annuity Rates

  • Product name: Asset Guard
    • Company Name: GBA Life
    • Rate: 4.4%
  • Product name: Fixed annuity series
    • Company Name: Harborview
    • Rate: 4.6%
  • Product name: Preserve 2
    • Company Name: Clear Spring
    • Rate: 4.6%

Three-Year Annuity Rates

  • Product name: American Classic 3
    • Company Name: American Life
    • Rate: 5.4%
  • Product name: MYGA Plus 3
    • Company Name: Ibexis
    • Rate: 5%
  • Product name: CL Sundance 3
    • Company Name: CL Life
    • Rate: 5.4%
  • Product name: Personal Choice 3
    • Company Name: Sentinel Security Life
    • Rate: 5.4%

Four-Year Annuity Rates

  • Product name: Simple Annuity 4
    • Company Name: Nassau
    • Rate: 5.1%
  • Product name: Platinum Assure 4
    • Company Name: Americo
    • Rate: 5.05%
  • Product name: Harbourview 4
    • Company Name: Oceanview
    • Rate: 4.9%
  • Product name: Preserve 4
    • Company Name: Clear Spring
    • Rate: 4.9%

Five-Year Annuity Rates

  • Product name: Farmers Safeguard Plus 5
    • Company Name: Farmers Life Insurance Company
    • Rate: 5.5%
  • Product name: CL Sundance 5
    • Company Name: CL Life
    • Rate: 5.5%
  • Product name: Safe Haven 5
    • Company Name: Atlantic Coast Life Insurance Company
    • Rate: 5.45%
  • Product name: Personal Choice 5
    • Company Name: Sentinel Security Life
    • Rate: 5.45%
  • Product name: American Classic 5
    • Company Name: American Life
    • Rate: 5.42%

Five-Year Annuity Rates

  • Product name: Safe Haven 6
    • Company Name: 
    • Atlantic Coast Life Insurance Company
    • Rate: 5.42%
  • Product name: Simple Annuity 6
    • Company Name:  Nassau
    • Rate: 5.35%
  • Product name: Secure Term Fixed Annuity V
    • Company Name: New York Life Insurance Company
    • Rate: 3.3-3.95%
  • Product name: USAA Protected Deferred Annuity
    • Company Name: USAA Life Insurance Company
    • Rate: 2.5%


Annuities are often an excellent way to invest, thanks to their tax deferral status. It’s also fantastic that they’re a guaranteed source of income, not dependent on the annuity company’s claims-paying ability.

It’s vital to remember that a fixed annuity is entirely different from a fixed-indexed annuity or a variable annuity. Thanks to the fixed interest rates that aren’t dependent on a financial index, you have a guaranteed interest rate, unlike that of a fixed-indexed annuity. Variable annuity policies have interest rates that aren’t fixed at all.

This guaranteed rate for fixed annuities is likely the number one reason why people choose this type of policy. It also makes it an excellent investment for retirees or young professionals with a lump sum to invest.

If you choose the right company, your fixed annuity policy will only benefit you. If you take advantage of these fixed rates today, in a few years’ time, you’ll be living off the dividends.

Jeremiah Konger
Jeremiah Konger
CEO at Annuity Association

Jeremiah understood his whole life the importance of community and caring for those who are a part of it. Starting his first business venture at the age of 23, he gained invaluable experience in working with others for a joint purpose.
He founded his first wireless retail business in 2011, expanding it from one store to 12 locations across the state in just three years.
Once he sold his company, Jeremiah began the journey he’s on today, using his talents and experience to work with seniors in order to help them find the best means of financing their retirement plans.

He’s found his true calling working as a proud member of the Annuity Association, assisting retirees in building their safe financial future.