Fixed annuities help people save money safely and predictably. They offer a more stable option than keeping money in a regular bank account or investing in the stock market.
While fixed annuities are similar to certificates of deposit (CDs), they have extra features that can make them even more useful, especially for long-term savings.
For example, CDs usually last no more than five years, and any interest you earn is taxed every year. With annuities, you can choose longer time periods, and all the money you earn stays tax-free until you make a withdrawal. This means your savings can grow faster because you don’t have to pay taxes on the earnings right away.
The following table shows 1-year fixed annuity rates from some of the best annuity providers. An annuity’s terms dictate how many years the initial rate is guaranteed.
Current 1-Year Fixed Annuity Rates
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| Product |
Rate
|
Guarantee Period
|
Surrender Period
|
AM Best Rating
|
|---|---|---|---|---|
|
GCU Insurance 1 + 4 Choice |
4.15% | 1 Years | 5 Years | A- |
American Pathway Fixed 5 Annuity |
4.65% | 1 Years | 5 Years | A |
|
American Pathway Fixed 5 Annuity |
4.90% | 1 Years | 5 Years | A |
|
American Pathway Fixed 7 Annuity |
4.65% | 1 Years | 7 Years | A |
|
American Pathway Fixed 7 Annuity |
4.90% | 1 Years | 7 Years | A |
Case Study: Buying a 1-Year Fixed Annuity
Choosing the right annuity term often depends on your circumstances. The following case study illustrates how someone might decide to purchase a one-year fixed annuity.
Anna
Age: 64
Goals:
- Reduce inflation’s impact on savings
- Create an income stream for retirement
- No savings locked away for multiple years
Anna has $50,000 in savings and is worried about how inflation might erode the purchasing power of that money over time. She also would like to establish a supplemental income stream in retirement.
However, Anna is concerned about locking her money up in an annuity for many years. She wants to be able to withdraw it and put it somewhere else if rates on other savings products become more favorable.
For all these reasons, a 1-year fixed annuity might make the most sense for Anna. She can grow her savings to keep pace with inflation while maintaining some liquidity and the ability to cash out her annuity at the end of the year.
1-Year Term vs. Other Term Options
A 1-year term is usually the shortest term you can find for a fixed annuity. After the one-year guarantee period has elapsed, you can renew your contract, possibly at a higher or lower rate, or you can cash out your annuity with the interest it earned.
Generally speaking, the longer your fixed annuity’s term lasts, the higher your guaranteed interest rate will be, although this isn’t always true in certain interest rate environments. Because of this, a 1-year fixed annuity might not be right for someone who wants to maximize accumulation.
“Short-term annuity rates are not competitive,” licensed insurance agent Jonathan Varner told Annuity.org. “I’ve not had anyone very interested in a 1-year [annuity], and most of those people are going to their banks and doing CDs or high-yield savings accounts.”
1-Year Annuity vs. 1-Year CD
Consumers looking for low-risk savings vehicles often consider both fixed annuities and certificates of deposit (CDs). This holds especially true when choosing a short-term option like a 1-year term.
The basic concept of these two products is similar; you pay a lump sum to the issuing organization that holds onto the funds for a certain period. At the end of the term, those funds are returned to you, along with a guaranteed interest rate.
Both fixed annuities and CDs are principal-protected investments, so there’s no risk of losing your money. The guaranteed protection of a fixed annuity is based on the insurer’s financial stability, while CDs are insured by the Federal Deposit Insurance Corporation (FDIC).
However, when comparing annuities and CDs, it’s important to consider more than just the interest rate.
For example, annuities offer the unique feature of annuitization, in which your premium and interest convert into a stream of income payments. You can often turn your fixed annuity into lifetime income, an option not available with CDs.
Another great benefit to purchasing an annuity over a CD is that they are generally protected from creditors and liens. I have many clients who reach out to me for that very purpose. Even if you are worried about a situation where Medicaid would require liquidation of assets prior to receiving benefits, an annuity would be protected versus a CD that would not be.
John Stevenson, CFFOwner and Advisor at Stevenson Retirement SolutionsJohn Stevenson, a Certified Financial Fiduciary®️, specializes in securing retirements with tax-free accounts. With a focus on guaranteed retirement, he’s ensured none of his clients suffer from market fluctuations. As a renowned educator and podcast host, John empowers thousands weekly, sharing his expertise in minimizing taxes and protecting against financial downturns.
See How Much You Could Earn With Today’s Best Rates
How We Get Our Rates Data
Annuity.org supplies fixed annuity rates through Cannex, an independent company that provides access to a database of continuously updated annuity products.
We synchronize and update our rates information several times each week with the newest Cannex data to help ensure you have access to the most recent interest rates available.
Annuity.org features regularly updated rates for fixed annuities from one- to 10-year terms. We also state the carrier offering the rate, along with that company’s AM Best financial strength rating.
