What Is The Average Return on Annuities?

Shawn Plummer, CRPC

Chartered Retirement Planning Counselor

What Is the Average Return on Annuities

The average return on an annuity varies depending on the type of annuity, the contract terms, and market conditions.

Average Return on a Multi-Year Guarantee Annuity

As MYGAs offer a guaranteed rate of return, the average return on this type of annuity is relatively straightforward. The return rate is decided at the contract initiation and remains fixed for the agreed duration. Under normal circumstances, one can expect to earn between 3% to 4% as an average rate of return.

Average Return on a Fixed Indexed Annuity

The average return of fixed-indexed annuities is harder to determine. It depends on the specific index performance and the contract’s participation rate, cap rate, and spread. It typically offers higher returns than an MYGA but less than a variable annuity. An investor can expect an average rate of return between 4% to 6%.

Average Return on a Variable Annuity

The average annuity return for variable annuities is potentially the highest among the three but carries a higher risk level. It greatly depends on the underlying investment performance. An investor can expect an average rate of return between 5% to 8% after fees have been taken out.

Single-Premium Immediate Annuity

A single-premium immediate annuity (SPIA) deserves special attention. In an SPIA, you make a single premium payment and begin receiving payments almost immediately. The return on this type of annuity is calculated based on the amount paid, your age, and the estimated payout period. An SPIA owner can expect a return rate ranging from 1% to 2%.

Annuity Average Return

Next Steps

Annuities can serve as powerful tools for retirement planning, providing a predictable income stream. Understanding the average return on annuities is crucial to ensure they align with your financial goals. Remember, while annuities can offer stability, balancing them with other investment assets for portfolio diversification is always important. Assessing the average annuity return isn’t just about looking at figures; it’s about interpreting these figures in light of your unique financial objectives.

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Which type of annuity has the highest average rate of return on annuities?

The type of annuity with the highest average rate of return depends on various factors, such as the investor’s risk tolerance and time horizon. Generally speaking, variable annuities offer higher rates of return than fixed annuities but at a greater level of risk.

What type of annuity generally has the lowest average rate of return on annuities?

Fixed annuities generally have the lowest average rate of return because they are not tied to market performance. This makes them less risky than variable annuities but also means that their rate of return is usually significantly lower. However, fixed annuity rates may be higher than other investments, such as CDs and bonds, for people who are more risk-averse or looking for a guaranteed income stream.

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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