Fixed annuities are a safe way to grow your savings if you want a steady and predictable option instead of putting your money in a bank or the stock market. They work in some ways like certificates of deposit (CDs), but they come with extra benefits that can help you save more money in the long run.
CDs usually have a maximum term of five years, during which your money does not grow tax-free. In comparison, annuities can last much longer, with the annuity’s term reflecting how long the initial rate is guaranteed.
Taxes on annuity earnings are also delayed until the funds are withdrawn. This is called tax deferral, and it helps your savings grow faster over time.
The following table shows 5-year fixed annuity rates from some of the nation’s top annuity providers.
Current 5-Year Fixed Annuity Rates
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| Product |
Rate
|
Guarantee Period
|
Surrender Period
|
AM Best Rating
|
|---|---|---|---|---|
|
Security Benefit Life Insurance Company Advanced Choice |
4.90% | 5 Years | 5 Years | A- |
|
American Life & Security Corp American Classic |
5.40% | 5 Years | 5 Years | B++ |
American Freedom Aspire 5 |
5.05% | 5 Years | 5 Years | A++ |
|
American Freedom Classic 5 |
5.00% | 5 Years | 5 Years | A++ |
|
American Freedom Classic 5 - 2025 |
5.00% | 5 Years | 5 Years | A++ |
Case Study: Buying a 5-Year Fixed Annuity
Amy
Age: 62
Amount Invested: $100,000
Amy plans to retire at the full retirement age of 67 in five years. She is satisfied with her current financial situation and doesn’t want to risk losses for the opportunity to grow her nest egg.
However, with just a few years to go, she’s interested in finding somewhere to put her money that offers predictable growth without market risk. She discovers a 5-year fixed annuity offering an annuity rate above 5% that is also tax-deferred.
This intrigues her for two reasons: the annuity may grow more effectively than a 5-year CD since the interest will not be taxed each year, and she will be in a lower tax bracket when she retires.
She decides to purchase the annuity with $100,000 of her retirement nest egg. The competitive interest rate is guaranteed throughout the entire five-year period, which means Amy can increase the value of her money by more than $30,000 by the time she retires.
5-Year Fixed Annuity vs. 5-Year CD
Five-year fixed annuities are often compared to 5-year certificates of deposit (CDs). Because they both offer safety and protection for your principal, you can grow your money in a predictable manner, thanks to the guaranteed rate.
One big difference between annuities vs. CDs is their purpose. CDs can be an appealing option instead of a regular savings account, allowing you to grow money that would otherwise remain stagnant.
Meanwhile, 5-year fixed annuities generally serve as retirement products designed to help your money grow through tax-deferred growth.
Fixed annuities also pay out in different ways. For example, your contract could be structured to provide you with guaranteed lifetime payments, as well as guaranteed income payments over a certain period, such as 10 or 20 years.
A critical benefit that a 5-year annuity could provide is the ability to withdraw all of the money before maturity without any surrender charges if you have a terminal illness or are confined to nursing care. This feature can be particularly beneficial for an older client who seeks guaranteed growth without losing access in times of real need.
A critical benefit that a 5-year annuity could provide is the ability to withdraw all of the money before maturity without incurring any surrender charges in the case of terminal illness or if the contract owner is confined to nursing care. This feature can be particularly beneficial for an older client who seeks guaranteed growth without losing access in times of real need.
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.
5-Year Fixed Annuity vs. 5-Year CD
| Option | 5-Year Fixed Annuity | 5-Year CD |
| Purpose | Grows your money in a tax-advantaged way for retirement | Grows money through interest |
| Tax Treatment | Tax-deferred | Annual ordinary income tax on interest earned |
| Liquidity | Can typically withdraw up to 10% of the value of the contract | Small penalty for early withdrawals |
| Safety | Guaranteed by the issuing insurance company | FDIC-insured within registration and ownership limits ($250,000) |
Another factor to consider when deciding between a CD and fixed annuity is the length of time. If you are more interested in a short-term product for one year or less, a CD, Treasury bill or high-yield savings account may be a better fit for your timeline.
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 providing access to a database of updated annuity products.
We synchronize and update our rates information several times each week using the newest Cannex data to help ensure you have access to the most recent interest rates available.
Annuity.org features rates for fixed annuities from one- to 10-year terms. In addition, we list the carrier offering the best rate, along with its respective AM Best financial strength rating.
