Learn the Average Return on Annuities Before You Buy

What Is the Average Return on Annuities?

Annuities can be a cornerstone of your retirement strategy, offering stability and a predictable income stream. The average return on an annuity varies depending on the type, the contract terms, and market conditions.

Compare current annuity rates by product type to put these averages in context before requesting a quote.

Note: Are you looking for Return OF Premium (getting your money back)? Click here for our guide on ROP Riders.

Average Return on a Multi-Year Guarantee Annuity (MYGA)

• MYGAs offer a guaranteed rate of return, making them a straightforward and reliable choice. At the initiation of the contract, the return rate is set and remains fixed for the agreed duration. You can expect an average return of 5% to 5.50%. This predictability can be vital to your retirement plan, providing a stable income stream.
• What They Are: A MYGA is a fixed annuity that pays a guaranteed interest rate for a set term—usually 3 to 10 years. Think of it like a tax-deferred CD issued by an insurance company, but often with better rates.
• How Returns Are Credited: Your return is guaranteed in writing when you buy the contract. It doesn’t depend on the stock market or any index. That makes it a simple plug-and-play solution for predictable growth.
• Use Case: If you want a safe parking spot for retirement funds, especially during high-interest-rate periods, MYGAs are ideal.
• Ideal Buyer: Someone nearing retirement who wants to grow money safely with better returns than CDs or savings accounts.
• Avoid If: You want growth above inflation, need income guarantees, or want market participation.
• Related Tip: If you want to lock in returns for 10+ years but still access income, consider pairing MYGAs with income-producing FIAs.

Average Return on a Fixed Indexed Annuity

• Fixed-indexed annuities link your returns to the performance of a specific index, offering a balance between potential growth and security. The average return can be between 5% and 7%, depending on the index performance, participation rate, cap rate, and spread. This type of annuity often yields higher returns than MYGAs but less than variable annuities, offering a middle ground regarding risk and reward.
• What They Are: FIAs offer interest based on the performance of a market index (like the S&P 500), but with a safety net: your principal and past credited interest are protected from losses.
• How Returns Are Credited: The insurer uses a formula—based on participation rates, cap rates, or spreads—to credit interest annually. For example, with a 50% participation rate, if the S&P 500 grows by 10%, you earn 5%. If the market falls, you earn 0%—but you don’t lose anything.
• Use Case: FIAs are built for pre-retirees or retirees who want higher growth potential than fixed annuities, but without risking loss.
• Ideal Buyer: Someone 50+ looking for safe growth potential with optional lifetime income, especially in a volatile market environment.
• Avoid If: You want full control over investment choices or short-term access to all your funds.
• Important Tip: Use FIAs with traditional indexes and avoid newer, engineered indexes unless you prioritize income over growth.
• Strategic Insight: Critics often point to these performance caps to label the product a “rip-off.” But is it? For retirees seeking principal protection over maximum growth, the math works differently. See our full verdict on whether this is a fixed index annuity scam or a legit concern.

Strategy Tip: While fixed annuities offer a flat, guaranteed return, many investors today prefer a performance-based annuity structure that captures stock market upside without the risk of losing principal.

Average Return on a Variable Annuity

• Variable annuities typically offer the highest returns, ranging from 6% to 8% after fees. These returns depend heavily on the performance of the underlying investments. While they carry more risk, the potential for higher returns can be appealing if you have a higher risk tolerance and a longer investment horizon.
• What They Are: Variable annuities are the only annuities that allow you to invest in mutual-fund-like subaccounts. You get full exposure to market growth—and loss.
• How Returns Are Credited: Returns depend on the performance of the investment options you select, minus annual fees and rider charges. Many policies include income or death benefit riders, which add to the cost.
• Use Case: Best for long-term investors comfortable with market swings who want tax deferral and optional lifetime income guarantees.
• Ideal Buyer: Younger investors or high-net-worth individuals with a longer investment horizon and risk tolerance.
• Avoid If: You’re risk-averse, nearing retirement, or need low-fee, predictable outcomes.
• Important Note: Always compare fees and fund performance. If you prioritize guaranteed income, consider an FIA with a GLWB instead.

Single-Premium Immediate Annuity (SPIA)

• SPIAs provide immediate payouts after a single premium payment, making them a unique and beneficial option. The return on this type of annuity is calculated based on your payment amount, age, and payout period. Expect a return rate ranging from 1% to 2%, offering a dependable income stream shortly after investment.
• What They Are: SPIAs convert a lump sum into a guaranteed income stream that starts immediately and lasts for life or a fixed period.
• How Returns Are Credited: SPIAs don’t grow—they return a mix of principal and interest as income. Your internal rate of return depends on your age, gender, and how long you live.
• Use Case: Best for retirees who need a predictable monthly income they can’t outlive—especially in cases like early retirement or Medicaid spend-down strategies.
• Ideal Buyer: Someone 59½+ needing immediate, dependable income with no need to access principal later.
• Avoid if: You need flexibility, want to pass money to heirs, or are worried about inflation.
• Alternative Strategy: Use an FIA with a GLWB for lifetime income with more control, flexibility, and legacy value.

Inflation Tip: A standard fixed payment loses purchasing power every year. If you are worried about rising costs, consider growing annuities that include Cost-of-Living Adjustments (COLAs) or increasing income riders to keep your lifestyle stable.

Side-by-Side Comparison of Annuity Returns and Features

What Is a Good Return on an Annuity in 2026?

• Fixed Annuity (MYGA): 4.75%+ for 3–5 years is very competitive
• FIA (without fees): Averaging 5%–7% with downside protection is a strong position
• Variable Annuity (after fees): 6%–8% is solid, but rarely achieved consistently
• SPIA (payout rate): Anything over 6% annual payout at age 70 is considered fair, but the internal return is still low

Expert Note: To get a truly competitive return, you need to see real-world numbers tailored to your zip code. Request a personalized annuity quote to receive a side-by-side comparison of the top three highest-performing annuities for your age and premium amount.

How to Maximize Your Annuity Returns

• Use longer terms (7+ years) to access higher rates
• Shop multiple carriers—don’t rely on one quote
• Compare indexed annuity crediting strategies carefully (annual point-to-point with participation rate only is often best)
• Avoid optional riders unless you actually need the benefits
• Work with a fiduciary broker—not an insurance company’s captive agent. Working with an independent annuity broker allows you to shop the entire market, ensuring you get the highest possible yield and the most favorable contract terms available today.

Retirement Strategy: The “internal rate of return” for an income annuity changes based on your age and how long you defer payments. Use our annuity calculator to model your specific scenario and see how different return assumptions impact your total retirement income.

Who Shouldn’t Buy an Annuity

• High-growth investors who want market-level returns with no constraints
• Those needing full liquidity—annuities typically come with surrender schedules
• Short-term savers—you’re better off using HYSA or treasury bills
• Fee-sensitive investors—especially when considering variable annuities

Insurance That Helps You Protect or Enhance Annuity Benefits

• Life Insurance (Term or IUL): Replaces lost principal if you annuitize or provides a death benefit if your annuity has limited payout options.
• Long-Term Care Insurance or Hybrid Annuities: Helps cover care costs without depleting your income-producing annuity.
• Disability Insurance: Replaces income before your annuity starts paying out, ideal for younger buyers planning early retirement income later.

How We Can Help

At The Annuity Expert, we understand that planning for retirement can be complex and overwhelming. With 18 years of experience as an insurance agency, annuity broker, and retirement planner, we specialize in helping you navigate the intricacies of annuities to secure your financial future.

Identifying Your Core Needs

Your core need is financial security in retirement. Annuities can address this need by providing a steady income stream, protecting your investments, and offering peace of mind. We believe in finding the best solutions at the lowest costs, ensuring you get the maximum benefit from your investments.

Symptoms of Financial Uncertainty

Financial uncertainty can manifest in various ways, such as anxiety about market volatility, fear of outliving your savings, or confusion about which annuity products are right for you. These symptoms can take an emotional toll, causing stress and uncertainty about your future.

What We Recommend

Taking the first step towards securing your financial future with annuities involves a clear and actionable plan. Here’s how we can help you achieve your goals:

• Step 1: Initial Consultation
  • Schedule a free consultation with one of our experts. During this session, we’ll assess your financial situation, retirement goals, and risk tolerance. The main benefit is a personalized retirement strategy tailored to your unique needs.
• Step 2: Tailored Annuity Solutions
  • Based on your consultation, we will recommend the most suitable annuity products for you. We’ll explain each option’s details, benefits, and potential returns. This step ensures you understand your choices and feel confident in your decision.
• Step 3: Implementation and Monitoring
  • Once you’ve chosen an annuity, we’ll handle all the paperwork and manage the implementation process. We’ll also monitor your annuity’s performance and provide regular updates. The main benefit is peace of mind, knowing your retirement plan is in expert hands.

Features and Benefits

• Personalized Plans: Tailored to your financial situation and goals.
• Expert Advice: Benefit from 18 years of industry experience.
• Ongoing Support: Regular updates and performance monitoring.
• Comprehensive Solutions: From MYGAs to variable annuities, we cover it all.

Addressing Common Objections

• High Fees: We provide transparent fee structures and work to minimize costs.
• Market Risk: We offer a range of products, including low-risk options.
• Complexity: Our experts simplify the process, making it easy to understand.

Choosing not to work with us may leave you facing continued uncertainty and potential financial shortfalls in retirement. However, partnering with us can lead to a secure, stable, and prosperous future. You’ll feel confident, relieved, and empowered, knowing you’ve made informed decisions about your retirement.

Contact us today for free advice or a quote and take the first step towards securing your financial future with The Annuity Expert.

Book A Free Consultation

Get help from a licensed financial professional. This service is free of charge.

Let Us Answer Your Questions

Not quite ready for a meeting, but you have a question that needs answering? We’re happy to help. Leave an inquiry below, and one of our staff will respond via email.