To answer that question, I need to know some information. First, you're going to have to tell me what you're trying to achieve and then we're going to get to the specific product types.
I always tell people annuities only solve for four things and those four things are an acronym that I created called PILL.
If you don't need to contractually solve for one or more of those, you don't need an annuity. The other thing that I use are two questions,
From those two answers, I can pair you up with the right annuity type to provide the highest contractual guarantee for your specific situation.
Now let’s move onto specific product types. You have your income annuities, which are
And then you have principal protection products like
For income annuities the best annuity rate is primarily based on your life expectancy at the time you take the payment and interest rates play a secondary role. Once you provide us with your birth date(s) and when you want the payment to start, I can tell you what the best annuity rate is. What you're doing is you're transferring the risk to the annuity company to pay you or you and someone else for the rest of your life or lives, regardless of how long you live. It’s a transfer of risk.
Now onto the principal protection products. Multi-Year Guarantee Annuities (MYGAs) are the industries version of a CD. To find the best annuity rate you need a place that lists all MYGAs for comparison. Fortunately, we do that here on our site. Just enter the state where you live and how many years you want to guarantee the rate and we will show you your options. Rate change all the time, so having this resource will be helpful.
When it comes to fixed index annuity rates, that's tough to answer because the accumulation value is that they only guarantee you with the Fixed Index Annuities, you're not going to lose any money. You don’t know what your rate is until after the index returns have been calculated.
So, when you ask what's the best annuity rate, it depends on the type of annuity you're talking about. Think of it as like buying a plane ticket. If you said, "What's the best plane ticket out there?" If you ask that instead of what's the best annuity rate? What's the best plane ticket? You got to know where you're going, who's going, how are you going, when you're going. Same thing. What's the best annuity rate? It depends. I'm just going to need to know specifics so I can give you the best contractual guarantee using our proprietary annuity calculators, of which you can use as well at theannuityman.com.
What you're asking is, "How much will the $500,000 annuity pay for life?" I don't know enough about you to give a rational answer. In this case the rate is primarily based on your life expectancy. If you said, "I just want to protect the principle, I don't want to touch it. I just want to peel off interest." That's a Multi-Year Guarantee Annuity. Just like you buy a CD, you could buy an annuity that pays an interest rate and you don't touch the principal and you can peel off that interest rate with most MYGAs.
But, most of the people that ask that question, they're asking, "What's my lifetime income stream?" Well, I'm going to need to know some information. Your date of birth, if it's joint with someone else, their date of birth. I'm also going to need, when you want that income to start. I'm going to need what state of residence you live in, because annuities like this are fixed annuities, they're regulated at the state level.
I'm going to need what account type you're using. IRA, Roth IRA, non-IRA, not because that determines how the income is going to be taxed. And then the final thing I'm going to need from you is do you want any type of backstop or guarantee on that income stream? Meaning that, when you die or if it's joint with someone and you both die, then what happens to the money? We can structure it so that 100% of any unused money goes to the list of beneficiaries of the policy.
Well, annuity rates come down in two forms. The first is life expectancy is part of the rate. If you're looking at lifetime income stream, annuity guarantees for lifetime income is combination of return of principal plus interest based on your life expectancy at the time you start the payments.
Think of your Social Security. The older you are, the higher the payment. Same with annuities. Why? Because the older you are, the less life expectancy you have, which means there's fewer payments, which means the payments are higher. You're transferring that risk to the annuity company to pay you for the rest of your life. When we talk about annuity rates, part of the rates is your life expectancy. The other part of the rates are interest rates.
Annuity interest rates can change rapidly depending upon the economic environment. Recently interest rates have been volatile, and they've been volatile going south in most cases. People often say, "Well, I'm going to wait to buy an annuity until interest rates go up." Well, that's not smart because if you're going to wait for an income annuity, then you have to factor in the payments that you miss while you're waiting and then you have to figure out how long it's going to take to make that up. All this time that you waited, et cetera, et cetera. Long story short, annuity companies have the big buildings for a reason. You cannot beat them. You need to find the best contractual guarantee for you.