What You Need to Know About Annuity Spreads

Shawn Plummer

CEO, The Annuity Expert

An annuity spread is an important part of an indexed annuity contract. This term refers to the difference between the interest rates earned on the money that is put into the annuity and the interest rates paid out to insurance companies. When you are shopping for an annuity, it is important to understand how this spread affects your payments. In this guide, we will discuss what annuity spreads are and how they can impact your retirement savings!

Indexed Annuity Spreads

A spread (margin) is the portion of the unadjusted interest rate (determined from the index strategy) that is subtracted before being applied to the funds allocated to the index strategy.

A spread reduces the amount of interest credited. Some indexed annuities have a participation rate as well as a spread.


For example, suppose that an insurance company imposes a one percent spread under its indexed annuity contracts but no other limitation (participation rate or cap). If the unadjusted index interest rate was 10 percent, the actual interest rate applied would be nine percent (10% – 1% = 9%).

Guaranteed Spreads

The guaranteed spread is set at the time of annuity issuance and cannot be increased by the insurer before the end of the index term.

Nonguaranteed Spreads

When a spread is nonguaranteed, the insurance company may increase it at any time and thereby lower the contract owner’s effective index interest rate.

Shawn Plummer

CEO, The Annuity Expert

I’m a licensed financial professional focusing on annuities and insurance for more than a decade. My former role was training financial advisors, including for a Fortune Global 500 insurance company. I’ve been featured in Time Magazine, Yahoo! Finance, MSN, SmartAsset, Entrepreneur, Bloomberg, The Simple Dollar, U.S. News and World Report, and Women’s Health Magazine.

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

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