When researching retirement income options, many Americans start with one simple question: Which annuity has the best rate right now? While that’s understandable, annuity rate comparison is more nuanced than comparing a single number on a chart.
For fixed rate annuities (commonly called MYGAs) and fixed index annuities (FIAs), rates can vary significantly by insurer, term length, index strategy, and contract design. A careful comparison can mean earning thousands more in interest over time — without taking on market risk.
This guide explains how annuity rates work in the US, how MYGA and FIA rates differ, and how to compare annuities correctly so you can make an informed decision.
What Does “Annuity Rate” Mean in the US?
The term annuity rate can mean different things depending on the product.
For fixed rate annuities (MYGAs), the rate refers to a guaranteed interest rate paid for a set period of time, similar to a bank CD but issued by an insurance company.
For fixed index annuities (FIAs), the “rate” is not a single guaranteed number. Instead, growth is tied to a market index (such as the S&P 500) using crediting methods like:
- Caps
- Participation rates
- Spreads
Understanding this difference is critical when doing an annuity rate comparison.
Why Annuity Rate Comparison Is So Important
Annuity rates are not the same across insurers. Two companies may offer:
- The same MYGA term
- The same index for an FIA
- The same surrender period
Yet produce very different outcomes.
For example, on a 3-year MYGA:
- One insurer may offer 4.75 percent
- Another may offer 5.40 percent
On a $250,000 deposit, that difference can result in thousands of dollars in additional guaranteed interest.
With FIAs, the impact can be even greater over time depending on how caps and participation rates are structured.
Fixed Rate Annuity (MYGA) Rate Comparison
How MYGA Rates Work
MYGAs provide:
- A guaranteed interest rate
- A fixed term (typically 3, 5, or 7 years)
- Tax-deferred growth
The rate is locked in for the entire term and does not change, regardless of market conditions.
What Affects MYGA Rates?
Several factors influence MYGA rates:
- Overall interest rate environment
- Length of the guarantee period
- Insurer financial strength
- State-specific regulations
Longer terms often pay higher rates, but not always. This is why comparing MYGA rates across multiple carriers is essential.
MYGA vs Bank CDs
MYGAs are often compared to CDs, but there are key differences:
- MYGAs typically offer higher rates
- Interest grows tax-deferred
- Withdrawals before age 59½ may trigger IRS penalties
- MYGAs are backed by the insurer, not the FDIC
A proper annuity rate comparison should factor in these distinctions.
Fixed Index Annuity (FIA) Rate Comparison
Why FIAs Are Harder to Compare
Unlike MYGAs, FIAs do not offer a single guaranteed rate. Instead, performance depends on how interest is credited.
Key variables include:
- Index selection
- Cap rates
- Participation rates
- Spreads
- Crediting frequency
Two FIAs tied to the same index can produce very different returns.
Understanding FIA Caps and Participation Rates
- Cap rate: The maximum interest credited in a period
- Participation rate: The percentage of index gains credited
Example:
If the index increases by 10 percent:
- A 6 percent cap limits interest to 6 percent
- A 70 percent participation rate credits 7 percent
Comparing FIAs without understanding these mechanics can lead to misleading conclusions.
Common FIA Rate Comparison Mistakes
Many investors make these errors:
- Focusing only on illustrated returns
- Ignoring renewal rate history
- Overlooking spreads and fees
- Comparing different surrender schedules
Annuity rate comparison for FIAs should include contract flexibility and long-term consistency, not just initial numbers.
MYGA vs FIA: Which Is Better for Rate-Focused Investors?
There is no one-size-fits-all answer.
MYGAs may be better if you want:
- Predictable, guaranteed growth
- Simple rate comparison
- Short- to medium-term planning
FIAs may be better if you want:
- Potential for higher long-term returns
- Protection from market losses
- Optional income riders
Comparing annuity rates across both product types can help align your choice with your risk tolerance and time horizon.
How to Compare Annuity Rates Across Insurance Companies
Look Beyond Advertised Rates
Introductory or teaser rates do not always reflect long-term value. Pay attention to:
- Renewal history (typically annually resettable or renewable for FIAs, whereas rates for MYGAs are guaranteed for the term)
- Rate reset policies
- Insurer reputation
Compare Financial Strength
Annuities are long-term contracts. Reviewing insurer ratings from agencies like AM Best and Standard & Poor’s adds an important layer to annuity rate comparison.
Understand Surrender Charges
Higher rates often come with longer surrender periods. Make sure the rate you choose aligns with your liquidity needs.
Are Online Annuity Rate Comparison Tools Accurate?
Online tools can be helpful for:
- Identifying current MYGA rate ranges
- Seeing available FIA index strategies
However, they often:
- Oversimplify FIA mechanics
- Exclude rider costs
- Do not reflect state-specific pricing
Personalized comparisons remain essential for accurate results.
When Is the Best Time to Lock in Annuity Rates?
MYGA rates tend to be more attractive when interest rates are higher. FIAs may become more appealing when market volatility increases and investors seek downside protection.
Some retirees use a combination of MYGAs and FIAs to balance guaranteed growth with long-term potential.
Frequently Asked Questions About Annuity Rate Comparison
What is the best annuity rate right now?
There is no single “best” annuity rate, because rates vary by product type, term length, insurer, and state. Fixed rate annuities (MYGAs) typically offer clearly defined guaranteed interest rates, while fixed index annuities (FIAs) offer growth potential based on index performance rather than a fixed rate. The best annuity rate depends on your time horizon, liquidity needs, and risk tolerance.
How often do annuity rates change?
MYGA rates can change frequently, sometimes weekly, depending on interest rate conditions and insurer pricing decisions. Once you purchase a MYGA, your rate is locked in for the full guarantee period. FIA caps and participation rates may change annually at renewal, but cannot go below the minimums stated in the contract.
Are MYGA rates better than bank CD rates?
MYGA rates are often higher than bank CD rates, especially for longer terms. In addition, MYGAs offer tax-deferred growth, which can be advantageous for retirement savers. However, MYGAs are insurance products, not bank deposits, and early withdrawals may be subject to surrender charges and IRS penalties before age 59½.
How are fixed index annuity rates calculated?
Fixed index annuities do not earn interest based on a single stated rate. Instead, interest is credited using a formula tied to a market index. This formula may include a cap rate, participation rate, or spread. The annuity earns interest when the index increases and is protected from losses when the index declines, subject to contract terms.
Can annuity rates go down after I buy?
With a MYGA, the interest rate is guaranteed and cannot decrease during the term. With an FIA, index crediting terms such as caps and participation rates can change after the first contract year, but the contract guarantees minimum values and protects against market losses.
Is now a good time to lock in annuity rates?
The best time to lock in annuity rates depends on personal goals and market conditions. MYGAs tend to be more attractive when interest rates are higher. FIAs may be appealing during periods of market volatility, as they offer growth potential without downside market risk. Some investors use a laddered approach to manage timing risk.
Why do annuity rates vary by state?
Annuity rates can vary by state due to differences in insurance regulations, state premium taxes, and insurer pricing strategies. This is why personalized, state-specific annuity rate comparisons are important when evaluating options.
Do higher annuity rates always mean a better annuity?
Not necessarily. Higher rates may come with longer surrender periods, reduced liquidity, or less favorable renewal terms. A good annuity rate comparison considers flexibility, contract guarantees, insurer strength, and long-term reliability — not just the headline rate.
Are online annuity rate comparison tools accurate?
Online tools can provide a general idea of current MYGA rates and available FIA strategies, but they often use simplified assumptions. They may not reflect state-specific pricing, rider costs, or renewal history. A detailed comparison based on your individual situation is usually more accurate.
Can I compare MYGAs and FIAs together?
Yes, but they should be evaluated differently. MYGAs are best compared by guaranteed rate, term, and surrender schedule. FIAs should be compared by index options, crediting methods, historical renewal behavior, and contract protections. Comparing both can help determine which better fits your retirement strategy.
Final Thoughts on Annuity Rate Comparison
Annuity rate comparison is not about chasing the highest number — it’s about finding the right balance between safety, growth, flexibility, and long-term reliability.
For MYGAs, the focus should be on guaranteed interest, term length, and insurer strength. For FIAs, it’s about understanding caps, participation rates, and contract design.
Taking the time to compare annuity rates carefully can significantly improve outcomes while preserving the core benefit annuities are designed to provide: financial certainty.
