Are 5-Year Fixed Annuities a Good Investment?

Shawn Plummer, CRPC

Chartered Retirement Planning Counselor

Are 5-Year Fixed Annuities a Good Investment?

It Depends on the Interest Rate Environment

  • High Interest Environment: In a high interest rate environment, a 5-year fixed annuity, also known as a Multi-Year Guaranteed Annuity (MYGA), might not be the best choice. The reason is that interest rates are likely to decrease over the next 5 years. In such cases, opting for an annuity with a longer term at a higher interest rate could be more beneficial.
  • Low-Interest Environment: Conversely, in a low interest rate environment, a 5-year fixed annuity can be an excellent investment. This is because interest rates are more likely to increase, making the fixed rate of the annuity more advantageous.

Related Reading: Are There 2-Year Fixed Annuities?

Limitations for Retirement Income

  • Not Ideal as a Sole Retirement Income Source: Using fixed annuity interest as a primary source of retirement income is generally not recommended. This approach can lead to underutilization of income potential, forcing retirees to significantly adjust their lifestyles.
  • Alternative – Fixed-Indexed Annuity: For those prioritizing income, a fixed-indexed annuity with a guaranteed lifetime income rider is often suggested. This type of annuity provides a fixed interest rate along with a guaranteed income stream that is not affected by fluctuations in interest rate environments.

Conclusion

Choosing the right type of annuity depends heavily on the current interest rate environment and your financial goals, especially regarding retirement income. While a 5-year fixed annuity can be advantageous in certain scenarios, it’s crucial to consider alternatives like fixed-indexed annuities for more stable retirement income. Contact us today for a free quote.

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Shawn Plummer, CRPC

Chartered Retirement Planning Counselor

Shawn Plummer is a Chartered Retirement Planning Counselor, insurance agent, and annuity broker with over 14 years of first-hand experience with annuities and insurance. Since beginning his journey in 2009, he has been pivotal in selling and educating about annuities and insurance products. Still, he has also played an instrumental role in training financial advisors for a prestigious Fortune Global 500 insurance company, Allianz. His insights and expertise have made him a sought-after voice in the industry, leading to features in renowned publications such as Time Magazine, Bloomberg, Entrepreneur, Yahoo! Finance, MSN, SmartAsset, The Simple Dollar, U.S. News and World Report, Women’s Health Magazine, and many more. Shawn’s driving ambition? To simplify retirement planning, he ensures his clients understand their choices and secure the best insurance coverage at unbeatable rates.

The Annuity Expert is an independent online insurance agency servicing consumers across the United States. The goal is to help you take the guesswork out of retirement planning and find the best insurance coverage at the cheapest rates

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