With the added benefit of tax deferral, a 5-year fixed index annuity (FIA) protects you from market downturns while allowing you to benefit from an underlying stock market index, such as the S&P 500.
However, many investors mistake the annuity’s surrender period. A 5-year fixed index annuity refers to the period you must wait before making penalty-free withdrawals. It does not mean that 5-year fixed index annuity rates are locked in for that period.
This type of annuity sits between a fixed annuity and full market exposure. Your account can grow when the linked index rises and hold steady when it falls. Your annuity company controls that growth through three crediting levers: caps, participation rates and spreads.
With a 0% floor, your principal is protected from market downturns. That makes these annuities a good fit for those who want little risk with a medium-term surrender period. They are more easily accessible than a 3-year fixed index annuity but more flexible than a 7-year or 10-year fixed index annuity.
This table below shows the current 5-year fixed index annuity terms from top annuity providers. Remember, because the headline number is a maximum and not a guarantee, you should compare the full contract design, not just the highest 5-year annuity cap rates, when shopping the best fixed index rates.
Today’s 3-year fixed index annuity cap rates
Updated July 31, 2026 · Source: Cannex
| Term | Carrier | Cap rate | AM Best | Bonus | Min premium |
|---|---|---|---|---|---|
| 3 yr | United of Omaha Insurance Company (a Mutual of Omaha company) | 9.00% | A+ | — | — |
| 3 yr | Security Benefit Life Insurance Company | 8.00% | A- | — | — |
| 3 yr | Oceanview Life and Annuity Company | 7.00% | A | — | — |
| 3 yr | MassMutual Ascend Life Insurance Company | 6.50% | A++ | — | — |
All available 3-year cap rates per Cannex. AM Best color-coding: green = Superior (A+/A++), gray = Excellent (A/A-), red = Good (B+/B++). Rates vary by state, premium band and rider selection.
What Does a 5-Year FIA Term Actually Mean?
With a 5-year FIA, the five-year term almost always refers to the surrender period. This is the window during which withdrawals above your contract’s free amount trigger a charge. It does not mean that 5-year indexed annuity rates are locked in for five years.
Most 5-year fixed index annuities credit interest over a 1-year crediting period, so your 5-year FIA cap rate or participation rate can be reset annually under the contract. A smaller number use a 5-year point-to-point method, in which a single calculation spans the entire term.
Knowing which type you’re buying matters more than the opening cap, because it determines how often your terms can change.
See: how indexed rates work for the full mechanics.
How Cap, Participation & Spread Rates Work
Annuity providers use certain levers to determine your total gains.
| Cap rate | Maximum credited in a period | 6% cap, 8% index gain → you get 6% |
| Participation rate | Share of the gain you receive | 90% par on a 10% gain → 9% |
| Spread | Percentage subtracted first | 3% spread on an 8% gain → 5% |
| Floor | Credited 0% in a down year | Never a loss |
Case Study: Buying a 5-Year Fixed Index Annuity
Name: Margaret
Age: 60
Annuity: $100,000
Five years from her target retirement date, Margaret wants growth potential without risking the savings she’ll soon rely on during retirement.
A 5-year FIA lets her track the S&P 500 up to a cap, while a 0% floor protects her principal in down years. Even better, the surrender period ends right as she retires, freeing the money when she needs it most.
5-Year FIA vs. 5-Year MYGA & Short CD
| If you care most about… | 5-yr fixed index annuity | 5-yr fixed annuity (MYGA) |
| Guaranteed return | Ccapped, market-linked | Set rate |
| Loss protection | 0% floor | Insurer-backed |
| Growth potential | Higher | Limited |
| Predictability | Moderate | Very high |
Find Out How Much Growth You Could Lock In
Who a 5-Year FIA Is (and Isn’t) Right For
When a 5-Year FIA Is Right:
A 5-year fixed index annuity makes sense if you have a genuine five-year horizon, want index-linked upside with downside protection and don’t need frequent access.
When a 5-Year FIA Isn’t Right:
This type of annuity is less ideal if you may need the money sooner than the surrender schedule allows, or if you want the certainty of a single guaranteed rate.
How We Get Our Rates Data
Annuity.org sources rates through Cannex, updated several times weekly. We list current cap, participation and spread terms by carrier along with each carrier’s AM Best rating. Not all products are available in every state.
Frequently Asked Questions
No, the cap or participation rate typically resets annually unless the contract uses a 5-year point-to-point crediting method. The surrender period, not the rate lock, is five years.
If the market drops, you’re credited 0% for that period. Your principal isn’t reduced by market losses, with the 0% floor instead serving as a core protection feature of fixed index annuities.
You can usually withdraw up to a certain amount penalty-free, typically 10% of contract value per year. Beyond that, surrender charges apply on a declining schedule over the contract term.
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