AnnuityAdvantage's Rate Survey Show Rates Ranging from 2.85 percent to 4.00 percent
MEDFORD, OR / ACCESSWIRE / May 22, 2018 / Savers can now get 4.00 percent on a 10-year fixed annuity, according to a rate survey from AnnuityAdvantage, an online annuity marketplace.
"It's the first time in a long time we've seen annuities reach the 4 percent mark," says Ken Nuss, CEO.
Investors who don't want to tie up their money that long still earn a good rate.
The top rate on a three-year annuity stands at 2.85 percent, according to the firm's survey of more than 300 annuities from dozens of top-rated insurers. With a five-year annuity, a buyer can earn up to 3.70 percent guaranteed rate.
Fixed Annuities Offer Guarantees, Simplicity
Fixed-rate deferred annuities are also called multi-year guarantee annuities or CD-type annuities. Like bank CDs, they provide a set, guaranteed interest rate for a stated period of time, usually three to 10 years.
As with a CD, there's no sales charge. "Whether you deposit $10,000 or $100,000 in a fixed annuity, all of it goes to work for you immediately," Nuss says.
Here are the main ways fixed annuities beat CDs:
Substantially higher rates, sometimes more than 1/3rd higher.
Tax-deferral. All CD interest is subject to federal and state income tax annually, even when it's reinvested and compounded in the CD. A fixed annuity is tax-deferred. You won't receive an annual 1099 and you won't pay tax on the interest until you withdraw it. At the end of the annuity's initial guarantee period, you may renew it for another term or roll it over into another annuity to continue deferring taxes.
Tax deferral doesn't apply when you hold an annuity in an IRA or other retirement account because those accounts are already tax advantaged. "Since you get a guaranteed, competitive rate, they're still a top choice for the portion of your retirement assets you want to protect and shelter from market risk," Nuss says.
For certain retirees, lower taxes on Social Security benefits. About 40 percent of retirees who receive Social Security pay taxes on at least a portion of their benefits. By reducing eligible income, you may be able to cut the amount of your Social Security benefits subject to income taxation, Nuss says.
"Someone who ditches their taxable CD and purchases an annuity reduces the income that may trigger the tax on Social Security benefits," he says. Most of the 40 percent of recipients who pay taxes on their benefits will profit from this strategy, but high-income retirees won't.
Greater unpenalized liquidity. Almost all banks impose substantial penalties on all early withdrawals from CDs. Most fixed-rate annuities let you withdraw interest or up to 10 percent of the value annually without penalty, Nuss points out. You will, however, have to pay income taxes on any interest withdrawn. Additionally, if you make an early withdrawal before age 59½, you'll also owe the IRS a 10 percent penalty on withdrawn interest earnings.
Annuity expert Ken Nuss is the founder and CEO of AnnuityAdvantage, a leading online provider of fixed-rate, fixed-indexed and immediate-income annuities. He launched the AnnuityAdvantage website in 1999 to help people looking for their best options in principal-protected annuities.
More information is available from the Medford, Oregon, based company at https://www.annuityadvantage.com or (800) 239-0356.
Contact: Henry Stimpson, Stimpson Communications, 508-647-0705, Henry@StimpsonCommunications.com
SOURCE: AnnuityAdvantage
