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Annuity rates: What you need to know before you buy | October 2020

An annuity rate is the rate of return that is associated with a certain type of annuity. Annuity Rates are used to calculate the amount of interest that will be paid to the owner or annuitant following the purchase of an annuity.

Multi-Year Guarantee Annuities, or MYGAs, are a type of fixed annuity where the rate is guaranteed for a specific period of time. In this case, the insurance company may offer the fixed rate for 3 years, 5-years, or even for 10-years.

Annuity rates represent the percentage that an annuity grows each year. Generally, the rate that you get on an annuity will depend on several key factors, including the type of annuity, whether or not there is a rate guarantee period, and the insurance carrier you purchase the annuity from.

But things are not necessarily always what they seem when it comes to annuity rates. For instance, even though you may see a generous rate advertised for a particular annuity, it may require a number of “what ifs” to occur in order to actually generate it.

Because MYGA rates change often, AnnuityGator.com updates the annuity rates tables every month. We recommend you check back often for the most recent annuity rates.

3-Year Surrender Period

Product NameAM BestCurrent Rate
Western United Life Navigator Ultra MVA 3B+2.65%
Upstream Life Secure Legacy 3-YearB++2.50%
Sagicor Life Milestone MYGA 3A-2.40%
Western United Life Navigator Elite MVA 3B+2.40%
Oceanview Life Harbourview 3A-2.35%

5-Year Surrender Period

Product NameAM BestCurrent Rate
Upstream Life Secure Legacy 5-YearB++3.45%
Sentinel Security Life Insurance Company Personal Choice Annuity 5B++3.35%
Atlantic Coast Life Safe Haven 5B++3.35%
Western United Life Navigator Ultra MVA 5B+3.30%
Americo Platinum Assure 5A3.20%

7-Year Surrender Period

Product NameAM BestCurrent Rate
Upstream Life Secure Legacy 7-YearB++3.50%
Sentinel Security Life Insurance Company Personal Choice Annuity 7B++3.45%
Atlantic Coast Life Safe Haven 7B++3.44%
Western United Life Ultra MVA 7B+3.40%
Oceanview Life and Annuity Harbourview 7A-2.95%

10-Year Surrender Period

Product NameAM BestCurrent Rate
Upstream Life Secure Legacy 10-YearB++3.60%
Sentinel Security Life Insurance Company Personal Choice 10B++3.55%
Atlantic Coast Life Safe Haven 10B++3.55%
Delaware Life Pinnacle MYGA 10-YearA-3.05%
Oceanview Life and Annuity Harbourview 10A-3.00%

Rates are based on current interest rates and are subject to change at any time. Some first year yields/rates reflect the fixed rate plus a premium bonus or interest rate enhancement. Upfront bonuses are frequently subject to a vesting schedule. Not all annuities are available in all states. Surrender charges may apply to withdrawals during the surrender period. A 10% IRS penalty may apply to withdrawals prior to age 59 ½. Annuity product guarantees rely on the financial strength and claims-paying ability of the issuing insurer. Annuities are not guaranteed by any bank or credit union and are not insured by the FDIC or any other federal government agency. Information presented on this website is not intended as tax or legal advice. You are encouraged to seek tax or legal advice from a qualified professional.

Taking a Closer Look at Multi-Year Guaranteed Annuities

In many ways, Multi-Year Guarantee Annuities can be compared to a Certificate of Deposit. For example, with a CD, an investor can purchase a 5-year Certificate of Deposit (CD) that offers a guaranteed yield of 2.5% for each of the 5 years. In comparison, an individual can purchase a 5-year MYGA annuity that offers a guaranteed yield of 3% for each of the five years.

While Multi-Year Guarantee Annuities can be compared to Certificates of Deposit, it is important to understand where the two products are alike and where the two are different. Knowing this can help you in determining which of these products may fit better into your overall investment goals.

CDs versus MYGAs

In terms of similarities, both a CD and a MYGA will provide their holders with a guaranteed fixed rate of interest for a set period of time. However, while a CD can offer very short time frames of less than a year, as well as longer time options, the shortest time frame that is typically offered by a MYGA is two years.

On the long end, MYGAs can offer guarantees for as long as 10 or more years. Other similarities include the fact that neither CDs nor MYGAs charge internal fees, however, both will impose a surrender charge if you withdraw your money prior to the time that your specified contract ends. (If you hold both of these products through to the full term of their contract, though, you will receive all of your initial deposit back in full).

It is important to note that CDs are backed by the FDIC and MYGAs are backed by the reserve system of each issuing company. While there are a number of similar features between the CD and the MYGA, there are also several differences. These are important to keep in mind, as they could mean the deciding factor as to why one or the other is better for you. First and foremost, the interest that is earned on a Certificate of Deposit is considered to be taxable on an annual basis if it isn’t within an IRA or other qualified account. Conversely, the interest that is earned on a MYGA is allowed to grow tax-deferred, and will only be taxable upon withdrawal. This can allow the funds to compound exponentially over time.

In addition, unlike with a CD, you are typically able to withdraw at least a portion of your money from a Multi-Year Guarantee Annuity. In most cases, you can take out up to 10 percent of your principal on a penalty-free basis without incurring any surrender charges if the funds are not in an IRA or other tax-qualified account. This can allow you some amount of liquidity should you need the cash in an emergency. However, you should also consider that if you put non-qualified funds into an annuity, you generally need to maintain them in an annuity until you are 59 1/2 or you may incur a tax penalty on the earnings upon withdrawal.

Key Advantages of a MYGA Annuity

So, what are some of the key advantages of owning a MYGA annuity? There are actually several. They include:

  • No fees.
  • Safety of principal.
  • Set interest rate each year.
  • Tax deferral.
  • Annual penalty-free withdrawal of principal.

With this in mind, given the strengths of each product, a nice combination of both CDs and MYGAs could even work together in complementing each other in a portfolio, depending on your specific risk tolerance, investment time frame, and financial goals.

Key Questions When Buying a MYGA Annuity

With so many annuities available today, it is essential to ensure that the one you choose is right for you and your specific needs. Even within the framework of Multi-Year Guarantee Annuity, there can be differences in how the contract is set up in terms of interest rate, length of guarantee, and income withdrawals.

With that in mind, there are several questions that you should have the answers to prior to moving forward with the purchase of a MYGA annuity. Having this information can help you to move closer to the outcome you desire – or to steer clear of a potentially negative financial decision.

Some of the important questions that you should ask before purchasing a Multi-Year Guarantee Annuity include the following:

Does the annuity have a guaranteed interest rate for the entire rate period, or can the rate change after the first year? If so, what will that rate be?

It is important to determine whether the MYGA annuity will have a guaranteed interest rate for the entire rate period, or if the rate can change after a certain period of time. If the rate can change, be sure that you know what the new rate will be.

Are withdrawals permitted during the term of the MYGA annuity?

The withdrawal provision is a provision of nearly all MYGA annuities. This allows you to withdraw a certain percentage of your total account value or your initial premium each policy year. Typically, MYGA account holders will be able to withdraw up to 10 percent of their principal each year without penalty. However, withdrawal of any funds before you reach age 59 1/2 may be subject to an IRS penalty of 10 percent of the earnings that are withdrawn.

Does the annuity’s interest compound?

With Multi-Year Guarantee Annuities, the interest on the account does compound. This will allow your funds’ interest to gain even more interest throughout the years

Is the growth on your funds inside the MYGA annuity taxed?

The growth on the funds inside your MYGA annuity due to interest are allowed to grow on a tax-deferred basis until the time of withdrawal. This means that the money inside of the account is allowed to continue growing untaxed for many years, allowing your funds the opportunity to compound exponentially over time.

This can be a distinct advantage over the funds inside of a CD (Certificate of Deposit), not held within an IRA or qualified account, as the interest that is earned on a CD is taxed each year – even if you leave those funds inside of the account.

Is the annuity insured?

While MYGA annuities are not FDIC insured – this is only for bank deposits – fixed annuities are guaranteed by the issuing insurance company. Therefore, it is important to check the underlying insurer’s ratings provided by agencies such as A.M. Best, Standard & Poor’s, and Moody’s.

Insurance companies are typically provided with grades that are indicative of their overall financial strength and their claims-paying ability. Be sure that the insurance company you go with is financially stable, as you will want it to be there in the future when you need them.

What happens to your funds in the MYGA annuity if you pass away prematurely?

As with many other types of annuities, if you pass away prematurely and you have not yet received back all of the money that you deposited into the annuity, your named beneficiary will receive the amount of the difference.

Are there any fees associated with a Multi-Year Guarantee Annuity?

With a Multi-Year Guarantee Annuity, there are no upfront sales charges, nor are there any ongoing maintenance fees. There may, however, be surrender charges. These will only occur if you withdraw more than 10 percent of the principal during the surrender period.

Is an Annuity Right for You?

Everyone’s short and long-term financial objectives can differ, along with risk tolerance and time frame until retirement. With that in mind, there isn’t any single financial tool that is right for everyone across the board.

If you’re considering the purchase of an annuity and you want to compare annuity rates, along with other potential benefits, Annuity Gator can help. Our primary mission at Annuity Gator is on educating consumers about whether or not annuities may be a good fit for retirement planning – and if so, which annuity may be best.

For any annuity-related questions you may have, feel free to reach out to us directly at (888) 440-2468, or send us an email. We look forward to hearing from you.

Annuity rates: What you need to know before you buy

1 Comment
  • joanna PAUL
    9:46 AM, 23 August 2020

    Hi Terry,
    We spoke before, and you guided me in choosing the right annuity months ago.
    Please call me when possible.
    Thank you , Joanna Paul

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