Analyzing Current Annuity Rate Trends
This article provides a comprehensive overview of current annuity rate trends, highlighting historical context, recent declines, and the best fixed-income options. It guides investors on choosing suitable annuity plans based on rates and payout structures, emphasizing the importance of understanding product types in retirement planning.
The sale of annuities has long been more prevalent than their purchase, with the industry holding an estimated worth of $2.8 trillion. This growth largely results from commission-driven products sold through insurance agents and brokers, often prioritizing sales over client interests. Recently, many brokers have shifted away from traditional annuities to prepare for upcoming regulations that impose a fiduciary standard on retirement investments.
In 2017, annuity rates declined notably, with variable annuity sales dropping to 10%, the lowest since 1998. Experts expect current rates to continue falling. Fixed income annuities currently offer some of the most competitive options, with rates between 5% and 6%. A $200,000 investment could yield approximately $12,000 annually—more than twice the $4,600 earned from a 10-year treasury. However, annuities vary between immediate and deferred payout structures.
Understanding average annuity rates, future value, and product types—whether immediate, fixed, deferred, or variable—is crucial in selecting the best plan. For example, in 2017, companies like American National offered immediate "life-only" annuities paying around $966 monthly at a 5.80% rate, resulting in a total of approximately $289,809 by age 85. Guardian also provided comparable plans, delivering about $964 monthly at a 5.79% rate, totaling roughly $289,260 by age 85.
