The following table shows rates for fixed annuities in the state of California. A fixed annuity earns a guaranteed interest rate for a set number of years, sometimes referred to as the annuity’s term. When the term elapses, the owner can cash out their annuity or convert it into a stream of income payments.
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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- |
Access SPDA |
3.45% | 6 Years | 6 Years | A- |
|
Access SPDA |
3.25% | 4 Years | 4 Years | A- |
|
Security Benefit Life Insurance Company Advanced Choice |
4.90% | 5 Years | 5 Years | A- |
|
Security Benefit Life Insurance Company Advanced Choice |
4.90% | 7 Years | 7 Years | A- |
Buying an Annuity in California
Today, California is one of the largest insurance markets in the world, valued at more than $123 million, and annuities play an enormous role.
“Annuities can be excellent products for helping Californians plan for retirement and live during their non-working years,” George F. Shave III, a Retirement Income Certified Professional (RICP®), told Annuity.org.
During the purchasing process, it’s important to ask questions and thoroughly examine your contract, he says. “I would advise clients to be sure they understand the terms of the annuity contract they are buying.”
Before your purchase is finalized, you will have a free look period that allows you to review your contract in greater detail and then cancel, if necessary. The free look period for senior residents in California is 30 days. This is higher than what many other states offer, serving as an extra annuity benefit for California residents.
Another significant benefit of purchasing an annuity in California is the lower surrender charges. Many Californians who contact me to buy annuity contracts are pleasantly surprised to learn that if they were to surrender their policy early, the charges would be much lower compared to those in neighboring states.
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.
Annuity Regulations in California
The California Department of Insurance (CDI) governs all annuity providers licensed in the state; its core mission is consumer protection. California has a few laws on the books that work towards this mission.
California’s annuity laws include Senate Bill 60, which institutes a code of conduct for financial advisors. It places restrictions on annuity advertising practices and provides protocols for annuity presentations held in clients’ homes. It also dictates how insurers can invest variable annuity premiums during the contract’s free look period.
The bill also requires financial advisors to receive continuing education about annuities. “California was the first state in the nation to mandate annuity training for advisors,” Shave said. “It started with an initial eight-hour training requirement and continues each license renewal with four hours of ongoing training. The goal here is to assure that we are putting better advisors in front of consumers.”
In 2011, California passed the Annuity Adequacy Bill or AB 689, which requires annuity providers and agents to ensure that an annuity or insurance product is appropriate for the customer by evaluating suitability requirements. These include factors like the purchaser’s age and income, as well as their financial needs, objectives and time horizon.
Another annuity consumer protection bill was signed into law in March 2024 by California Governor Gavin Newsom. Senate Bill 263 strengthens existing regulations by requiring insurance agents to act within the consumer’s best interest when recommending or selling annuity products. It also mandates that insurers provide a buyer’s guide to all consumers who buy an annuity.
California is one of many states that provide some protection from creditors. The state’s asset protection laws offer some exemptions for annuity contracts both before and after annuitization.
For unmatured life policies, including annuities, the exempt amount is $17,525 for an individual or $35,050 for a married couple. However, courts can levy a financial judgment beyond these dollar amounts.
Benefits from matured annuity policies are exempt when they’re reasonably necessary to support the debtor, their spouse and dependents.
If you buy an annuity in California while you’re a resident of the state, the agreement is governed by California law — even if you later move to another state with different asset protection rules.
Looking To Buy an Annuity in California?
Annuity Taxation in California
California is one of a handful of states that impose a state premium tax on annuities. The tax applies to both qualified and non-qualified annuities, but the two types are taxed at different rates. The non-qualified annuity premium tax rate in California is 2.35%, while qualified annuity premiums are taxed at only 0.50%.
Whether you have a qualified or non-qualified annuity, California’s premium tax only takes effect once you annuitize your contract.
Early retirement plan withdrawals are subject to a 10% federal penalty. California assesses an additional 2.5% penalty on early distributions.
California residents also have a state income tax, ranging from 1% to 12.3%, depending on filing status and taxable income. The state doesn’t tax Social Security benefits, estates or inheritances, but annuity payments are considered taxable income.
California Annuity Resources
As you consider your annuity options in California, review each company’s ratings to gauge their financial stability. A financial advisor or annuity expert can answer your questions and guide you in the right direction as you pursue your financial goals.
To learn more about California annuities, visit:
- California Department of Insurance
- California Annuities Guide for Seniors
- California Life Insurance and Annuities Guide
Frequently Asked Questions About Annuities in California
Yes, California levies a 2.35% tax on the premiums paid for private annuities and a 0.5% tax on the premiums paid for qualified deferred and income annuities. Additionally, state income tax may be levied on your annuity income.
Annuities enjoy some protection from creditors in California. If you’re single and the annuity is unmatured, $17,525 of its value is exempt. Benefits from matured annuities may also be protected if you and your loved ones rely on those benefits for support.
California’s annuity regulations include mandating annuity training for financial advisors, restricting annuity advertising practices and requiring insurers to evaluate the suitability of an annuity for their customers.
Still have questions?
