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An annuity is a contract made between an insurance company and an investor. In exchange for premium payments from the investor, the insurance company agrees to pay a certain amount of money in the future.
A fixed annuity comes with a guaranteed minimum interest rate — set by the insurance company providing the annuity, which means you can better predict the amount of income it will produce. The higher your interest rate on a fixed annuity, the more your money can potentially grow.
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Current Monthly Fixed Annuity Rates
Fixed annuities can provide you with predictable monthly income in retirement. The actual rate you receive and your monthly payment amount depend on several factors, including:
- Size of the annuity
- Interest rate
- Your age
- The state you live in
- Contract term
- Whether the annuity allows withdrawals
- When you begin receiving payments
- Whether you receive immediate or deferred payments
- How long you receive payments
Average Fixed Annuity Rates by Term Length
To help you evaluate interest rates as you shop for a fixed-rate annuity, GOBankingRates averaged the five highest and five lowest rates among the best multi-year guaranteed annuity rates published by Annuity Resources. Where Annuity Resources listed fewer than 10 annuities, GOBankingRates averaged all the published rates. Annuities available in one state were excluded.
| Term Length | Interest Rate |
|---|---|
| 2-year Term | 4.14% |
| 3-year Term | 4.26% |
| 4-year Term | 4.77% |
| 5-year Term | 4.64% |
| 6-year Term | 4.82% |
| 7-year Term | 4.67% |
| 8-year Term | 4.85% |
| 9-year Term | 4.81% |
| 10-year Term | 4.78% |
To see how this might play out for your retirement, consider the example of a 60-year-old with $100,000 to put into an annuity. They choose a five-year fixed annuity and will receive their payments over 20 years, beginning in 2030, when they turn 65. This annuity will pay them $837 per month for the entire 20-year period, for a total minimum payout of $200,880.
Key Factors That Influence Rates
Insurance companies base their published rates on many variables. Key ones include economic conditions, the provider’s financial strength and the contract term.
Economic Conditions
The premium you pay for a fixed-rate annuity is invested primarily in fixed-income assets such as bonds, so bond yields influence annuity rates. Bond yields, in turn, tend to move in the same direction as economic trends such as inflation and the federal funds rate.
Provider’s Financial Strength
Insurance companies receive credit ratings from several credit rating agencies. In some cases, the financial strength of a highly rated company lets it offer competitive rates. However, the opposite also might be true. Insurance companies have to hold a lot of capital to earn the top credit ratings, and as a result, they have less to pay out to annuity investors.
That said, financial strength should always take precedence over rates when you’re shopping for an annuity. A struggling company could fold before it has paid out your annuity.
Term Length
Generally speaking, the longer terms have higher rates. That means you’ll likely earn a better return with a seven-year annuity than you will with a two-year contract.
Benefits of Fixed-Rate Annuities
Fixed-rate annuities offer a number of benefits that make them a good choice for the right investor.
- Guaranteed income with predictable growth
- Funds grow tax-deferred until you withdraw them in retirement
- Principal protection against market volatility
Drawbacks To Consider
These drawbacks might not be deal-breakers, but it’s important to understand them before you invest.
- Withdrawing money before contract term ends might incur penalty
- Lower returns compared to stocks and mutual funds
- Vulnerable to inflation risk, which reduces the value, albeit not the dollar amount, of your annuity
How To Compare and Choose the Best Rates
A modest difference in interest rates can have a significant impact on your payout. Here’s how to compare fixed annuities to find the best deals.
- Compare rates from several different annuity providers. Also look at how rates vary between terms.
- Annuity fees can catch you off-guard if you’re not prepared for them. Read your contract to make sure you understand your contract’s surrender charges and other fees as well as renewal rates.
- Work with a fee-based financial advisor who can make customized recommendations based on your financial situation and retirement income needs.
Alternatives to Fixed-Rate Annuities
Fixed-rate annuities are one of several financial products that can produce predictable income in retirement. Here are a few more:
Certificates of Deposit
CDs are a type of savings account with some features in common with fixed-rate annuities. You lock in your money for a set period of time in return for a guaranteed interest rate. When the CD matures you can renew your CD at the current rate or take your money out.
Bonds
Bonds produce income with relatively low risk compared to stocks–the reasons fixed-rate annuities invest their clients’ premiums in bonds. You might have to forgo guaranteed rates, but you gain the flexibility to select which bonds or bond funds to invest in.
Indexed Annuities
Indexed annuities track an underlying benchmark index, such as the S&P 500. They give you exposure to the market and a greater potential for growth while limiting your risk by capping losses to a certain percentage of your principal. On the downside, they also cap your earnings.
Conclusion
A fixed-rate annuity can provide you with a predictable and consistent monthly income in retirement. You can use your annuity payments to supplement other retirement income and possibly delay Social Security to increase your benefit.
When comparing fixed annuities, it’s important to understand your guaranteed rate, the term length of your investment and each insurance company’s financial rating. This helps you gauge the value of your annuity, how much you’ll make (at a minimum) and how long the contract lasts.
Fixed Rate Annuities FAQ
Learn more about fixed-rate annuities and the role they can play in your retirement planning.- What is a good fixed annuity rate in 2025?
- That depends on many factors, including the term of your annuity. Among annuities offering the highest rates, per Annuity Resources, the averages fall between 4.14% to 4.85% depending on the term.
- How do fixed-rate annuities differ from CDs?
- The most important difference is that an annuity is an insurance contract and a CD is a type of savings account. Also notable is the annuity’s ability to provide monthly income for life.
- Can I access my funds early?
- Yes, but you’ll likely pay a tax penalty if you withdraw them before age 59 1/2. In addition, you could be hit with a surrender charge.
- Are fixed annuities safe during economic downturns?
- Fixed annuities provide protection during downturns. They offer a guaranteed interest rate and protect your principal against losses.
Allison Hache, Jacob Wade and Karen Doyle contributed to the reporting for this article.
Data is accurate as of Feb. 4, 2025, and is subject to change.
Annuity rates were sourced from Annuity Resources and from additional research by our editorial team.
Our in-house research team and on-site financial experts work together to create content that’s accurate, impartial, and up to date. We fact-check every single statistic, quote and fact using trusted primary resources to make sure the information we provide is correct. You can learn more about GOBankingRates’ processes and standards in our editorial policy.
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