Why Past Annuity Rates Still Matter and What They Tell You About Today’s Market
If you’re buying an annuity now, don’t make the mistake of looking at current rates in isolation. By comparing historical annuity rates with today’s, you’ll know whether you’re locking in a good deal—or settling for less than you should. This guide will explain how fixed annuities, SPIAs, and indexed annuities have evolved over time, what today’s market offers, and what to expect next.
We’ll also show you how annuities — along with life insurance and long-term care products – can create security, income, and protection, especially when markets or interest rates change.
Fixed Annuities (MYGAs): Historical vs. Current Rates
What They Are
A Multi-Year Guaranteed Annuity (MYGA) is a type of fixed annuity that pays a guaranteed interest rate for a set term—typically 3, 5, 7, or 10 years.
How They Work
Insurance companies invest your premium in high-quality, long-term bonds. They lock in a fixed rate at the time of purchase, which compounds tax-deferred.
Historical Performance
- 2010–2020: MYGA rates hovered between 2–3% due to ultra-low bond yields.
- 2023–2025: Rates surged, with many carriers offering 5%–6.5% for 5-year terms and 6%–7% for 7+ year terms.
Pros:
- Higher guaranteed rates than CDs or savings accounts
- Tax-deferred growth
- Annual penalty-free withdrawal options
Cons:
- Surrender charges for early withdrawals above free allowances
- Not inflation-adjusted
- Interest taxed as ordinary income when withdrawn
Who Needs It:
- IRA or 401(k) rollovers needing fixed, guaranteed growth
- Retirees who want better-than-CD returns with safety
Who Doesn’t:
- People needing full liquidity
- Those requiring inflation-protected or market-based growth
Insurance Add-On: Consider life insurance to replace the taxable value passed to heirs or long-term care annuities to protect fixed funds from future healthcare costs.
SPIAs: Income Based on Interest Rate Trends
What They Are
A Single Premium Immediate Annuity (SPIA) gives you guaranteed income for life (or a set period) starting immediately.
How They Work
Your payout is based on your age and current interest rates. The older you are and the higher the rates, the more income you’ll receive.
Historical Trends
- 2008–2021: With interest rates near zero, SPIA payouts were modest—about 4%–5% for a 65-year-old.
- 2023–2025: SPIA payouts have jumped, with some carriers offering over 7% lifetime payouts due to rising bond yields.
Pros:
- Simple and immediate income
- No market risk
- Guarantees last as long as you live
Cons:
- Income ends at death unless a period-certain or refund is added
- Irreversible contract
- No liquidity
Who Needs It:
- Retirees who want predictable monthly income now
- Medicaid-planning scenarios
- Early retirees using a life-only SPIA paired with permanent life insurance to protect heirs
Who Doesn’t:
- Those who want access to their principal
- People uncomfortable with losing control of their funds
Alternative: Fixed indexed annuities with a Guaranteed Lifetime Withdrawal Benefit (GLWB) offer the same income potential with more flexibility and a better death benefit.
Indexed Annuities: Growth and Income With Safety
What They Are
Fixed-indexed annuities (FIAs) earn interest based on a stock market index, such as the S&P 500. They include a guaranteed minimum value and never lose value due to market downturns.
How They Work
You choose an index strategy (e.g., annual point-to-point with a cap or participation rate). Each year, your gains are locked in and cannot be lost in future years. Most FIAs also offer a 1-Year Fixed Account as a safe alternative.
Historical Returns
- 2012–2022: FIAs earned between 3%–5% annually on average, depending on the index and caps
- 2023–2025: Higher caps and participation rates have pushed potential earnings to 5%–8% with strong upside in bull markets
Pros:
- Principal protection
- Lifetime income options with GLWB riders
- Tax-deferred growth
- Fixed interest option each year
Cons:
- Returns limited by index rules (caps, spreads, or participation rates)
- Complex crediting strategies
- Engineered indexes often lack long-term history
Who Needs It:
- Pre-retirees and retirees seeking market-linked growth without downside risk
- IRA, Roth IRA, and non-qualified investors
- Those needing future income with optional GLWB
Who Doesn’t:
- Investors needing full liquidity
- Those who want unlimited market upside
Add-On Protection: GLWB riders offer guaranteed lifetime income. Pair with life insurance for legacy or LTC annuity riders for future healthcare protection.
What About Future Annuity Rates?
Today’s Rates: As of mid-2026, annuity rates are the highest they’ve been in over a decade. SPIA payouts, MYGA guarantees, and GLWB roll-up rates are all at elevated levels due to the interest rate environment.
What to Expect Tomorrow:
- If rates fall: Today’s rates could be the peak. Locking in now could protect you from lower future yields.
- If rates rise more: Future rates might increase slightly, but not significantly—the bulk of the interest rate hikes are likely behind us unless inflation rebounds.
- Long-term planning: Indexed annuities allow you to benefit from rising rates over time due to annual resets. MYGAs lock in today’s high but don’t adjust upward.
Takeaway: If you wait, you may miss this window. Rates may soften as the Federal Reserve stabilizes or lowers interest rates. Annuities don’t price like CDs—insurance carrier portfolios react slower, so timing matters.
What Happens After the Annuity Term Ends—and Why Interest Rates Matter for Your Next Step
Many people focus only on the interest rate during the annuity term, but what happens after your fixed annuity or indexed annuity matures can significantly affect your long-term financial outcome. Here’s what to expect, how interest rates affect your renewal, and what happens to your investment when you pass away.
After the Term: Fixed Annuities (MYGAs)
End of Term Options (Renewal Window)
When your MYGA reaches the end of its guarantee period—usually 3, 5, 7, or 10 years—you enter a 30-day “renewal window.” This is a critical decision point:
- Renew into a new guaranteed period: If you do nothing, the insurance company will usually roll you into another term with a new interest rate. But you may not get the best rate available, especially if market rates have dropped or the renewal terms are less favorable.
- Transfer to a new MYGA from a different insurer: You can shop for the highest current rates and transfer your balance into a new contract without triggering taxes if done as a 1035 exchange (non-qualified funds) or custodian-to-custodian transfer (qualified funds).
- Withdraw all or a portion of your funds: After the term ends, you can take your entire balance penalty-free. You may owe taxes on interest earned, depending on the funding type.
How Interest Rate Environments Affect Renewals
The interest rate you’re offered at renewal depends on:
- Current bond market yields: Insurers adjust rates based on what they can earn in today’s market. If rates are lower at maturity, your renewal rate will reflect that drop.
- The insurer’s portfolio: Insurers base renewals on their general account performance, which reacts more slowly than current Fed policy.
- Your action window: You only have a 30-day period to act before being locked into the insurer’s default renewal term and rate.
Why It Matters:
If you purchased a MYGA in 2022–2025 with a 5%–6%+ rate, those renewal terms may not be available in a lower-rate future. This is why you must re-shop the market at maturity.
After the Term: Fixed Indexed Annuities (FIAs)
Ongoing Contract After Surrender Period Ends
When the surrender period ends (typically 7–10 years), your FIA continues as an active annuity contract. Here’s what that means:
- No more surrender charges: You now have full liquidity, with no penalty to withdraw any or all of your funds.
- Interest continues: You still earn interest based on your selected index strategies. You can change strategies annually during the contract anniversary window.
- Guaranteed minimum value remains: Your annuity continues to offer a minimum guaranteed value (MGV) floor, even after the term ends.
- GLWB income remains active: If you added a Guaranteed Lifetime Withdrawal Benefit, you can start or continue withdrawals—even after the surrender period.
Interest Rate Environment Impact
- Renewal caps and participation rates may change: While your principal and credited gains are locked in, the new terms for future index gains (cap rates, participation rates, etc.) are determined annually. If interest rates fall, insurers may lower these future caps.
- Fixed account rates also adjust: If you’re using the 1-Year Fixed Account option, the renewal rate will reflect the current interest rate environment and may be lower than your initial years.
What You Should Do
- Review your contract anniversary statement each year: This is when you can switch index strategies.
- Consider reallocating: If renewal terms on your existing FIA become unattractive, use a 1035 exchange to transfer to a new FIA with higher caps or fixed interest.
What Happens at Death?
Death Benefit Basics for All Annuities
Unless you’ve annuitized (turned the contract into irrevocable income payments), all deferred annuities—including MYGAs and FIAs—provide a death benefit equal to the current account value.
- Paid as a lump sum or continued to a spouse: Your beneficiary receives the full contract value with no surrender charges. In most cases, spouses can continue the contract tax-deferred.
- Avoids probate: As long as a named beneficiary exists, annuity death benefits are paid outside the probate process.
- Taxation: Non-qualified annuities pass along any gain as taxable income to beneficiaries. Qualified annuities (like IRAs) follow required distribution rules.
What If You Annuitized?
- Life-only option: Payments stop at death—nothing is left to your heirs.
- Life with period certain: If death occurs during the period (e.g., 10 years), the beneficiary gets the remaining payments.
- Life with refund: Any unused balance is paid to beneficiaries.
Why You Should Avoid Annuitization
Annuitization removes access, control, and flexibility. That’s why we recommend using GLWBs instead—they provide lifetime income, preserve your account value, and pay a full death benefit.
Protecting Yourself Long-Term
After your annuity term ends, the value of your contract—both financially and strategically—depends on what you do next:
- Don’t roll into a bad renewal without checking the broader market.
- Don’t stay in a low-yield FIA if you can improve caps or features with a new contract.
- Don’t annuitize unless it’s absolutely necessary—use a GLWB instead to keep control.
And if your goal is to leave money behind, combine your annuity with a life insurance policy. This ensures beneficiaries receive a tax-free legacy even if you use the annuity for income.
What Type of Accounts Can Fund Annuities?
- Qualified Accounts: IRA, Roth IRA, 401(k), 403(b), pension rollovers
- Non-Qualified: Personal savings, CDs, brokerage accounts
- Inherited Accounts: Stretch IRA strategy or lump sum into a non-qualified annuity for income or tax deferral
Final Thoughts
Historical annuity rates show just how rare today’s environment is. If you’re looking for safe accumulation or guaranteed lifetime income, now may be the best time in decades to act. But annuities are not all created equal. The type of annuity, the insurer’s credit rating, surrender terms, rider options, and how you plan to use the annuity all matter more than the headline rate.
Want to compare historical performance, current payouts, and future income projections? Contact The Annuity Expert for free quotes and help buying the right annuity at the right time—for income, protection, or both. Get expert support finding the best deal from A-rated carriers.
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