How to Choose the Right Timeframe for Your Money
When you buy a fixed annuity—specifically a Multi-Year Guaranteed Annuity (MYGA)—you are making a simple trade with the insurance company: in exchange for committing your money for a set period of time (the “term”), the company guarantees you a fixed, predictable interest rate for that exact duration.
Much like a bank Certificate of Deposit (CD), the longer you are willing to leave your money alone, the higher the interest rate you can typically earn.
However, picking the right term length isn’t just about chasing the highest rate. You have to balance your desire for growth with your need for liquidity. Below is our complete directory of annuity term lengths to help you find the exact contract that fits your retirement timeline.
Compare Annuity Terms by Length
Whether you need a short-term haven for your cash or a long-term compound interest engine, select a term length below to see how it works, what the current rate expectations are, and who it is best suited for.
Short-Term Annuities (1 to 3 Years)
Short-term MYGAs are excellent for parking cash during volatile markets or while waiting for interest rates to shift. They offer higher yields than traditional savings accounts without a long-term commitment.
Mid-Term Annuities (4 to 7 Years)
This is the “sweet spot” for most fixed annuity buyers. These terms typically offer the best balance of high guaranteed interest rates and reasonable surrender periods. The 5-year MYGA is consistently the most popular product on the market.
Long-Term Annuities (8 to 20+ Years)
Long-term contracts are designed for money you absolutely know you will not need to touch for a decade or more. They lock in a guaranteed rate for the long haul, protecting you against future interest rate drops.
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3 Things to Consider Before Locking in a Term
Before you sign a contract and start the clock on your surrender period, make sure you have evaluated these three factors:
1. The Surrender Period Matches the Term
In a fixed annuity, the “term length” is synonymous with the “surrender period.” If you buy a 5-year annuity, you will face penalty fees (surrender charges) if you withdraw more than your allowed penalty-free amount before those 5 years are up. Never lock up money you might need for an emergency.
2. The Power of “Annuity Laddering.”
If you can’t decide between a short-term and a long-term, you don’t have to guess. Many savvy investors use an “Annuity Ladder.” Instead of putting $100,000 into a single 5-year annuity, you put $33,000 into a 3-year, $33,000 into a 4-year, and $33,000 into a 5-year. This gives you access to a chunk of your principal every single year as they mature, while still capturing high rates.
3. What Happens When the Term Ends?
When your guaranteed-rate period ends, your options may include withdrawing funds, renewing, or transferring to another annuity. The withdrawal window and any new surrender period depend on your contract. Review the insurance company’s renewal notice before making a decision.
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