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An annuity is an insurance contract in which you pay a premium to receive regular payments for a specified period of time. It can be used as a way to fund your retirement so that you don’t outlive your savings. Your annuity rate is the percentage by which your annuity grows each year.
Most annuity providers guarantee your interest rate for a fixed term, usually three to 10 years. The best annuities have higher rates of return, low provider fees, low minimum investment amounts, and are backed by companies with long-established reputations for financial stability and customer satisfaction. Take a look at which annuity providers and products have been proven to shepherd people to financial security in their later years.
Best Overall : Fidelity
With low fees, the ability to rebalance or trade without penalties, six annuities to choose from, and personal service from selection to account servicing, Fidelity scored top marks to become our best overall annuity provider.
Low fees, including account transfers
Rebalance or trade without penalty
Six annuity choices in three categories
Personalized customer service with high ratings
Some annuities require a higher initial investment than other providers
Some people have reported difficulty in making withdrawals or closing their account
Fidelity, with higher customer service ratings, personalized consulting on the front-end to plan your annuity strategy, low fees, and several annuity options, earned our praise as the overall best.
Opening in 1946, Fidelity has been a leader in the annuities industry for several decades and became the first annuities company to offer online wealth management solutions. Today, this investment management firm enjoys an A+ AM Best rating and has $11.1 trillion customer assets under management.
Fidelity offers six annuities that address retirement income, asset protection, and income generation.
- Fidelity Personal Retirement Annuity: $10,000+ investment
- New York Life Premier Variable Annuity-P Series with Investment Preservation Rider-P Series: $25,000+ investment
- Deferred fixed annuities: $5,000+ investment
- Deferred income annuities: $10,000+ investment
- New York Life Clear Income Fixed Annuity-FP Series: $50,000+ minimum
- Immediate fixed income annuities: $10,000+ minimum
These annuities have annual fees ranging from 0.1% with an initial investment of $1 million or more, up to 1.9%, plus pertinent mutual fund fees.
The company has perfect or near-perfect scores from other reviewers that capture ratings, such as Barron’s, Kiplinger, Investor’s Business Daily, Consumer Affairs, Consumer Advocate, and Retirement Living.
Best Fixed Indexed Annuity : Allianz
Allianz sets itself apart as our choice for best fixed indexed annuity with its two income bonuses. One you earn during your retirement saving phase and the other once you begin receiving payments.
No annual fees on their fixed indexed annuities
Minimum initial premium between $10,000 and $20,000
Seven annuity choices
Start buying your annuity contract at the age of 50
Fee-free withdrawals only on the 11th contract year onward
It is tough to beat zero annual fees, but Allianz takes its efforts to the next level by designing in two bonuses to earn it the best fixed indexed annuity title. Customers are eligible for a 15% boost to any premium payments they make in the opening 18 months of the contract. Once you start receiving payments, you stand to gain further thanks to Allianz paying a 50% bonus on any interest your indexed assets earn.
The company started in Minneapolis, Minnesota, in 1896. Allianz has since grown to become a leading provider of retirement and protection solutions both locally and internationally. Allianz Life boasts an AM Best rating of A+.
Allianz offers seven fixed indexed annuities:
- Allianz Benefit Control Annuity: $20,000+ investment
- Allianz 222 Annuity: $20,000+ investment
- Core Income 7 Annuity with Core Income Benefit Rider: $10,000+ investment
- Allianz 360 Annuity with the 360 Benefit Rider: $20,000+ investment
- Essential Income 7 Annuity with Essential Income Benefit: $10,000+ investment
- Retirement Foundation ADV Annuity with Income Benefit Rider: $10,000+ investment
- Allianz Accumulation Advantage Annuity: $20,000+ investment
The fixed indexed annuities have surrender charge periods between seven to 10 years, and typically start with a 10% penalty and decrease by one percent each year. Rates of return range from 4.24% to 7.83%.
Allianz has a total of $2.82 trillion assets under management for 92 million retail and corporate clients.
Best Variable Annuity : New York Life
If you’re looking to take advantage of the market, a variable annuity through New York Life is for you. Their low minimum premium and flexible withdrawal structure mean that your money stays accessible to you, earning our vote for the best variable annuity.
Withdrawals allowed up to 10% of the account value
Possibility of high returns, depending on market conditions
Minimum premium is $2,500 for qualified accounts
Annual fees in addition to surrender charges
Maximum age is 80
The company offers a plethora of both fixed and variable annuities, but their variable plans offer some of the most promising returns on this list, earning it the top spot for variable annuities. Depending on market conditions, you could see returns of up to 8% or more.
New York Life is an established name in the life insurance industry. Since 1845, the company has been protecting and growing assets. Now the largest mutual insurer in the U.S., New York Life has earned an A++ AM Best rating.
New York Life charges relatively standard fees of $30 to $40 annually, and a 1.20% to 1.60% mortality and expense fee, depending on your plan. You’ll also have to pay surrender charges if you want to withdraw more than 10% of your account value at a time. Withdraw up to 10% of your account value without any penalties assuming you are over 59 1/2 years of age. You can start with a premium of only $2,500 (or $5,000 for non-qualified accounts).
Best Straight Life Annuity : USAA
USAA’s Single Premium Immediate Annuity (SPIA) took the title of the best straight life annuity with its blend of low fees, immediate payment, financial stability, and a plethora of program options.
Income for life
Not tied to market risk
Your money will never earn less than the guaranteed minimum interest rate
Limited growth; you may not earn as much as investing in the stock market
Early withdrawal penalties from the IRS
Surrender charges may apply
With a $0 minimum initial premium, no annual fees, and flexible program options, USAA’s SPIA stands as the best straight life annuity. Its “Lifetime Only” option guarantees income for life, and payments stop when you die because there is no beneficiary with this plan–thus offering higher regular income payments.
USAA has been around since 1922 serving military members and their families with insurance, banking, investments, and retirement products like annuities. The company has over $71 billion in assets under management and an AM Best rating of A++.
USAA offers deferred annuities and immediate annuities.
- Fixed Guaranteed Growth Annuity (a deferred annuity): $20,000 to $50,000
- Single Premium Immediate Annuity: No minimum
There are no annual contract fees or upfront fees. The only charge USAA calls out is the 10% IRS penalty, which is only relevant if you make a withdrawal before age 59 1/2.
Current annual return rates range between 1% and 2%, but there is a rider option that elevates your payments by 3% every year. With a straight life policy, there is ample chance to be paid more than you put into the annuity. If you outlive your invested premium, the annuity provider continues to pay you, but this time from the provider’s account.
USAA offers three different payout options. You can opt for the lifetime-only plan, where you’ll have income for life, and payment stops when you die. Or you can select a 10-, 15-, or 20-year payment term. Finally, you can design a blend of both. The lifetime and guaranteed period of time option helps you get income for life, and you can add a beneficiary who may continue to get paid if you die before the guaranteed period ends.
Best Term Certain Annuity : MassMutual
MassMutual’s RetireEase product stands out as the best term certain annuity. It combines no annual contract fees with a low minimum initial premium, and centuries-old financial stability.
No annual contract fee
$10,000 initial premium minimum
A++ AM Best rating
Choose monthly, quarterly, semi-annual, or annual payments
Early withdrawal fees/surrender charges before year 10
Other small administrative fees
Small percentage of complaints about difficulty processing withdrawals
If you’re looking for income for a specific period of time, consider MassMutual’s RetireEase. The product scored highly in our review because of its flexible program design, no annual contract fees, low entry point, and stellar financial history.
Founded in 1851, MassMutual is a mutual insurance company, which means it is partially owned by its members. It has proven reliable and stable since its founding through wars, depressions, and recessions. AM Best rates it an A++.
MassMutual offers the following annuity products:
- Deferred Fixed Annuity
- Variable Annuity
- Fixed Index Annuity
- Immediate Income Annuity
- Deferred Income Annuity
The minimum initial investment starts at $10,000, with annual fees in the range of 1.67% to 2.77%, plus surrender charges in years one through nine. Current return rates range from 1.32% to 5.27%.
MassMutual’s customer ratings online are quite high. The company manages over $3 billion in customer assets annually, so there are of course a few complaints to be found, but these are a very small proportion compared to the total customer base.
As a mutual company, MassMutual is beholden to its policyholders, not Wall Street.
Best Multi-Year Guaranteed Annuity : American National
If you’re looking for a long-term annuity, American National has options for you. Their multi-year guaranteed annuity, our pick as the best, will show you impressive returns that are worth the wait.
Excellent returns starting at 2.30%
Minimum premium as low as $5,000
Penalty-free withdrawal after 10 years
Penalty-free death benefit
10% federal penalty and income taxes apply to earnings withdrawn before age 59 1/2
Surrender charge before year 10
Our best multi-year guaranteed annuity, American National Palladium MYG 10 Annuity, has excellent rates with a low minimum premium of only $5,000. The company offers a wide variety of insurance products, with their annuity options earning them an A rating with AM Best. The company has been in business since 1905 and manages over $20.3 billion in total assets.
American National Palladium MYG Annuity 10 is a great option, no matter what premium level you choose. There are three bands from which to choose. Starting at $5,000, you will earn a guaranteed 2.30% annual yield, while putting in over $100,000 will get you 2.40%. Finally, you’ll see returns of 2.55% at their highest premium level of $250,000 or more.
American National doesn’t charge an annual fee or percentage. However, you will be charged a 2.5% sales commission up front. It’s important to know that money you withdraw before the 10th year of your annuity will be subject to a fee of up to 8%, depending on the contract year.
American National stands out as an annuity provider with dependable returns and very flexible plans for your unique financial situation. The company even offers an add-on service called Lifetime Income Rider to provide you with a guaranteed income, even if your annuity value is zero.
When seeking the best annuities, you’ll want to first get clear about your goals. Will it be income generation? Asset protection? Reliable income in your retirement years? Some annuities can address all of these to some degree, but an advisor can steer you to a shortlist of options that are designed to excel in one.
The best annuity providers offer multiple plan options with convenient online and in-person advisory services, dependable return rates, lower fees than their competitors, minimum investment requirements achievable by a broad range of people, stellar customer satisfaction ratings, and a sound financial reputation. Our best overall, Fidelity, offers the best blend of all these factors, with a track record of 26 million customers.
Compare the Best Annuity Rates
|Company||AM Best Rating||Fees||Types of Annuities||Average Return Rate||Type of Provider|
|A+||Initial investments of less than $1 million: Annual fee of 0.25% (+ Fund Fees); Initial investments of $1 million and above: Annual fee of 0.10% (+ Fund Fees)||Personal Retirement Annuity, Variable Annuity, Deferred Fixed Annuity, Deferred Income Annuity, Clear Income Fixed Annuity, Immediate Fixed Income Annuity||1.65%||Investment Management Firm|
Best Fixed Indexed Annuity
|A+||Core Income 7 Annuity $10,000 minimum premium: 1.25% rider charge; Allianz Index Advantage Variable Annuity $10,000 minimum premium: 1.25% annual fee (+ 0.64%-0.72% variable option annual fee and 0.20% death benefit rider fee)||Fixed Index Annuities, Index Variable Annuities||4.37% to 6.70%||Insurance Company, Financial Services Firm|
|New York Life
Best Variable Annuity
|A++||Annual fee: $30 to $40 (waived at $100,000); Mortality and Expense fee: 1.20% to 1.60% (depending on premium payments and account value); Surrender charges: 1% to 8% (applies to withdrawals beyond the surrender charge-free withdrawal amount, calculated based on date of premium payment)||Fixed Deferred Annuities, Variable Annuities||7% to 8%||Insurance Company|
|USAA Single Premium Immediate Annuity
Best Straight Life Annuity
|A++||Annual fee: $0.00; Surrender charges for early withdrawals||Lifetime and a Guaranteed Period of Time, Guaranteed Period of Time, Lifetime Only||1% to 2%, or you can design your payments to increase up to 3% each year||Insurance Company|
|Mass Mutual RetireEase
Best Term Certain Annuity
|A++||1.67%-2.77% plus surrender charges in years 1-9||Deferred Fixed Annuity, Variable Annuity, Fixed Index Annuity, Immediate Income Annuity, Deferred Income Annuity||1.32% to 5.27%||Insurance Company|
|American National Palladium MYG 10 Annuity
Best Multi-Year Guaranteed Annuity
|A||2.5% upfront charge, plus surrender charges in years 1-9||High-Band ($250,000-$1,000,000), Mid-Band ($100,000-$249,999), Low-Band ($5,000-$99,999)||2.55%||Insurance Company|
How Do Annuities Work?
An annuity is a contract issued by an insurance company in which you pay a premium to receive regular payments for a specified period of time. Annuities work as insurance against outliving your savings. They are often used as a way to fund retirement with tax-deferred growth. Your annuity works differently depending on the type you buy and your contract provisions.
Annuities are insurance products that provide a reliable, steady stream of payments to support your financial needs for the rest of your life or for a pre-determined number of years.
Can You Lose Money in an Annuity?
Annuities come in several forms, the two most common being fixed annuities and variable annuities. During a recession, variable annuities pose much more risk than fixed annuities because they are tied to market indexes, which recessions tend to pummel. Fixed annuities, by contrast, offer guaranteed rates of return.
Though fixed annuities provide peace of mind during recessions, they tend to underperform, at least compared with their variable counterparts, when the economy is doing well. During good times, variable annuities reward investors willing to shoulder higher risk by providing, on average, more-aggressive returns.
What Is a Good Return Rate for an Annuity?
The top rate for a three-year annuity is 2.25%, according to Annuity.org’s online rate database. For a five-year, it’s 2.80%, and for a 10-year annuity, it’s 2.70%. That said, it’s important to keep in mind that annuity return rates are not measured the same as, for example, a mutual fund’s rate of return.
Whereas a mutual fund could return 30% one year and lose 6% the following year, annuities are designed to provide steady income over time, in some cases, for as long as you live. Income preservation into your 80s and 90s is the trade-off you make for guaranteed income from this insurance product. It’s generally not about chasing the highest rate of return you can find, but rather a safe product provided by a financially sound company with great customer service.
Who Are Annuities Best For?
Typically you should consider an annuity only after you have maxed out other tax-advantaged retirement investment vehicles, such as 401(k) plans and IRAs. If you have additional money to set aside for retirement, an annuity's tax-free growth may make sense–especially if you are in a high-income tax bracket.
Most financial advisors will tell you that the best age for starting an income annuity is between 70 and 75, which allows for the maximum payout. However, only you can decide when it's time for a secure, guaranteed stream of income.
Where Can You Buy Annuities?
You can buy annuities from:
- Insurance carriers such as New York Life
- Annuity distributors, including large brokerage firms known as wirehouses, such as Merrill Lynch and Morgan Stanley
- Independent broker-dealers like Raymond James
- Large banks such as Bank of America
- Mutual fund companies like Vanguard and Fidelity, which are considered some of the most competitive companies because they offer lower fees
- Thousands of independent agents, brokers, and financial advisors across the country
How We Chose the Best Annuity Rates
We researched 20 companies offering annuities and evaluated each company based on customer service, financial stability, annuity product options, minimum investment amounts, provider fees, and return rates. The providers that made it to our top six had solid, proven, trustworthy reputations; lower fees than most; and a suite of annuity options that met a wide range of financial entry points.