Which Type of Annuity Pays the Best Rate?

We hear this question all the time from South Florida pre-retirees and retirees: “Which annuity pays the best rate?” This is a very common question we get. There is a direct answer, but it’s important to first understand the types of annuities available first, and the purpose they serve. Before diving in, let’s break down the four main annuity types and how their coinciding rates.

The 4 Types of Annuities & How Their Returns Differ

There are four primary annuities, each with unique payout structures:

1. Variable Annuities
   No fixed rate here. Your money is invested in market-based funds (stocks, bonds) within the contract. Upside is unlimited, but so is downside risk your account value can rise or fall with the market. Best for growth-focused investors comfortable with volatility.

2. Single Premium Immediate/Deffered Annuities (SPIAs/SPDAs)
   These don’t offer a traditional “growth rate.” You invest a lump sum for lifetime income either starting immediately (SPIA) or later (SPDA). Payouts are calculated using life expectancy, the longer you wait to start, the higher the monthly payouts. Ideal for predictable, lifelong income without managing investments.

3. Multi-Year Guarantee Annuities (MYGAs)
   MYGA's are comparable to CD's in which you earn a fixed interest rate for a set period. MYGA's guarantee a fixed interest rate (currently 5–6.7%) for periods between 2 and 20 years, with tax-deferred growth (unlike CDs). No risk, no market exposure, perfect for conservative investors prioritizing capital preservation and steady returns.

4. Fixed Indexed Annuities (FIAs)
   The hybrid. Choose how to earn interest, choose when to turn income on.

   • Market-linked: Participate in index gains (e.g., S&P 500) up to a cap (10% for example), with 0% floor, which means no losses in down years.

   • Fixed rate option: Lock in a guaranteed crediting rate.

   • Lifetime income: Convert to payouts anytime, now or later.
     Blends growth potential, downside protection, and income flexibility.

So, Which Annuity Pays the Best Fixed Rate?

• Best Guaranteed Rate (Short-Term): MYGAs win with 5–6.7% fixed rates for 2–20 years, higher rates than CDs, tax-deferred, and zero market risk.

• Best Growth Potential (Long-Term): Variable annuities, offer the best growth potential over a long period of time, like the markets

• Best Lifetime Income: SPIAs/SPDAs maximize monthly payouts based on life expectancy.

• Best Flexibility: FIAs, with options to switch between fixed, indexed, or income modes.

Tip: With the Fed cutting rates again this year, locking in MYGA rates now secures higher yields before they drop.

Want to see how fixed interest payments benefit your retirement income stream? Use our Retirement Income Calculator to see where your income stands.

Choosing the Right Annuity for Your Retirement

Ask yourself:

• Risk Tolerance: Conservative? Choose MYGAs or FIAs with fixed crediting. Growth-oriented? Lean into FIAs or variable annuities.

• Timeline: 5–10 years out? Build with MYGAs or SPDAs. Already retired? SPIAs deliver instant income.

• Income Needs: Need lifelong payments? SPIAs or FIAs with income riders guarantee essentials.

• Tax Strategy: All annuities grow tax-deferred and are RMD friendly.

Want to see available rates? Schedule a free consultation with our team to see what's possible.

Why This Matters for Your Retirement

For pre-retirees:

• Secures Income: Covers essentials with guaranteed payouts.

• Protects Wealth: Shields against market crashes (FIAs/MYGAs) or outliving savings (SPIAs).

• Helps You Thrive: Frees growth assets by locking in income.

Take the Next Step: Don’t guess—calculate. Try our Sequence of Returns Calculator to stress-test your plan, or book a call below for personalized guidance.