Fixed Annuities in the U.S.: How They Work, Types, Benefits, and Leading Providers
Learn how fixed annuities work in the U.S., including traditional, immediate, and MYGA options. For more information, use a quick search below.
Fixed annuities have become a cornerstone of retirement planning in the United States for individuals seeking guaranteed income, tax-deferred growth, and protection from market volatility. With growing concerns around market instability, longer life expectancies, and Social Security uncertainty, many Americans are turning to fixed annuities to ensure predictable income streams during retirement.
This article explores how fixed annuities work, their types, key benefits and risks, average pricing structures, and the top providers offering fixed annuity products in the U.S.
Understanding Fixed Annuities
A fixed annuity is a financial product sold by insurance companies that allows individuals to invest a lump sum or series of payments in exchange for guaranteed returns over time. After an accumulation phase, during which the investment grows at a fixed interest rate, the insurer pays out regular income for a specified period or for life.
Fixed annuities are particularly appealing to conservative investors or retirees who prioritize income stability over high returns.
Types of Fixed Annuities in the U.S.
1. Traditional Fixed Annuities
These offer a guaranteed interest rate for a set period—often 3, 5, 7, or 10 years—similar to a certificate of deposit (CD). After the term ends, the rate may reset based on the insurer’s discretion.
Ideal For: Risk-averse investors, CD alternatives
Rate Example (as of 2024): 4.0%–5.5% fixed for 5 years
Payout Options: Lump-sum withdrawal, periodic income, or annuitization
2. Multi-Year Guaranteed Annuities (MYGAs)
A sub-type of fixed annuity, MYGAs lock in an interest rate for multiple years, typically ranging from 3 to 10 years. These are often used to grow funds tax-deferred before converting to an income stream.
Ideal For: Pre-retirees seeking short- to mid-term growth
Rate Example: 5.0% fixed for 6 years
Minimum Investment: $10,000–$25,000
3. Immediate Fixed Annuities
Also known as single premium immediate annuities (SPIAs), these start payouts right after a lump sum is invested. They're designed to convert retirement savings into guaranteed lifetime income.
Ideal For: Retirees looking to begin income now
Payout Basis: Age, gender, and investment amount
Customization: Lifetime income, joint income, or period-certain payouts
4. Deferred Fixed Annuities
These are designed to grow over time before payouts begin. Often used by individuals still in their working years who want to plan ahead for retirement income.
Ideal For: Younger investors or late-career professionals
Deferral Period: 5–30 years depending on age and goals
Tax Benefit: Earnings grow tax-deferred until withdrawn
Benefits of Fixed Annuities
- Guaranteed Returns: Predictable interest rates shield you from market volatility.
- Tax-Deferred Growth: Interest earned isn’t taxed until withdrawals begin, allowing faster compounding.
- Lifetime Income Options: Many fixed annuities can be annuitized to provide income that lasts as long as you live.
- No Market Risk: Unlike variable annuities or stocks, your principal and returns are not affected by market downturns.
- Flexible Payouts: Choose from lump-sum withdrawals, monthly income, or fixed period payouts.
Risks and Considerations
- Liquidity Restrictions: Early withdrawals can trigger surrender charges (often 5–10%) and IRS penalties if taken before age 59½.
- Inflation Risk: Since returns are fixed, the value of your money may not keep pace with inflation over time.
- Lower Long-Term Growth: Compared to equities or mutual funds, fixed annuities offer limited upside potential.
- Complex Contract Terms: Riders and fee structures can be difficult to understand without expert guidance.
Typical Costs and Contract Terms
- Surrender Period: Typically 3–10 years, with decreasing penalties for early withdrawal each year
- Administrative Fees: Usually minimal, often built into the interest rate
- Optional Riders: Death benefits, long-term care, or COLA (cost-of-living adjustment) may increase annual fees by 0.5%–1.5%
- Minimum Investment: Generally between $5,000–$25,000 depending on the product
Top Fixed Annuity Providers in the U.S.
1. Athene
Known for competitive MYGA rates and strong financial stability. Offers a wide range of fixed and fixed indexed annuities.
Website: athene.com
2. MassMutual
Offers SPIAs and deferred annuities with highly customizable payout options. A long-standing mutual insurer with strong ratings.
Website: massmutual.com
3. Allianz Life
A major provider of retirement income products, offering fixed annuities with optional income and protection riders.
Website: allianzlife.com
4. Fidelity & Guaranty Life (F&G)
Provides simplified fixed annuity products that appeal to conservative investors.
Website: fglife.com
5. New York Life
Offers traditional fixed and immediate annuities, with a reputation for financial strength and service.
Website: newyorklife.com
6. Lincoln Financial Group
Strong in both immediate and deferred annuities, with a range of flexible payout options and add-on features.
Website: lfg.com
Fixed annuities offer American investors a reliable and low-risk way to grow retirement savings and secure steady income. With predictable interest, tax-deferred growth, and protection from market downturns, they can be an essential part of a diversified retirement strategy. Whether you’re nearing retirement or planning decades ahead, fixed annuities provide the financial peace of mind that comes with knowing exactly what you’ll receive—and when.
Before committing to a fixed annuity, it’s important to compare rates, understand contract terms, and work with a licensed financial advisor who can match the product to your specific goals. In an age of uncertainty, fixed annuities deliver something rare: certainty.
