When planning for retirement, one of the most critical decisions is how to secure a reliable stream of income that lasts. Annuities often emerge as a viable option, offering guaranteed payments over a set period or for the remainder of your life. But before diving into annuity contracts, one pressing question arises: what is a good annuity rate?
Understanding what makes an annuity rate “good” depends on several factors, including market conditions, the type of annuity, your age, and your financial goals. This guide explores annuity rate benchmarks, what impacts them, and how to evaluate if an annuity is the right fit for your retirement strategy.
What Is an Annuity?
An annuity is a financial product issued by insurance companies that provides a steady income stream, typically during retirement. You can purchase an annuity either as a lump sum or through a series of payments. In exchange, the insurance company promises to make periodic payments for a specified duration.
There are several types of annuities, including:
- Fixed annuities: Offer a guaranteed rate of return.
- Variable annuities: Returns fluctuate based on the performance of underlying investments.
- Indexed annuities: Returns are tied to the performance of a market index like the S&P 500.
- Immediate annuities: Begin payouts almost immediately after the initial investment.
- Deferred annuities: Accumulate interest over time before payments begin at a future date.
Understanding the type of annuity you’re considering is key to understanding what a good rate looks like.
How Annuity Rates Are Determined
Annuity rates are determined by multiple factors:
- Interest rates: Just like savings accounts and bonds, annuities are sensitive to prevailing interest rates. When rates rise, annuity payouts tend to increase.
- Insurance company’s investment strategy: The yield from the company’s underlying investments influences what they can afford to pay.
- Age and gender: Older individuals typically receive higher monthly payments because their expected lifespan is shorter. Gender also plays a role due to life expectancy differences.
- Payout options: Whether you choose lifetime income, a period certain, or joint life with survivorship will affect your rate.
- Principal amount: A larger investment can sometimes fetch better payout rates or bonuses.
Current Benchmarks: What Is Considered a Good Rate?
As of late 2025, a good fixed annuity rate can range between 5.00% and 6.50% for multi-year guaranteed annuities (MYGAs). For immediate annuities, payout rates might vary depending on the buyer’s age, but someone in their 60s might expect a payout rate of around 6% to 7% annually.
However, these numbers shift with market conditions. When interest rates are high—as they have been recently—annuity rates become more attractive. Conversely, in low-interest environments, annuity returns may fall short of inflation.
This is why many retirees are looking to lock in favorable annuity contracts now, before rates shift again.
Case Example: Boosting Monthly Income Without Extra Cost
Suppose a retiree currently receives $1,000 per month from an annuity purchased several years ago. If current annuity rates are significantly higher, they could potentially roll over their annuity or purchase a new one to secure a higher monthly payout—without putting more money in.
Let’s say the new rate could yield $1,400 per month. That’s $4,800 more per year, or $120,000 over 25 years. All this without investing any new funds, simply by taking advantage of current high-rate annuity products.
Should You Lock in a Rate Now?
There is growing interest in locking in annuity rates while they remain elevated. Just like mortgage rates, annuity rates fluctuate based on broader economic indicators like inflation, bond yields, and central bank policies.
Once interest rates drop again, annuity payouts will too. For retirees or near-retirees, securing a guaranteed lifetime income with today’s strong rates can offer peace of mind and long-term security.
At ELVT Financial, we help clients evaluate whether current annuity rates align with their long-term income goals. We also guide them through reviewing existing annuity contracts to determine if better opportunities exist.
Factors to Consider When Evaluating an Annuity Rate
To determine whether an annuity rate is good for your situation, consider the following:
Your Age and Health
The older you are when you start taking payments, the higher your monthly payout. If you’re in poor health, you may want to explore annuities with flexible or lump-sum withdrawal options.
Your Financial Needs
Will the annuity cover all your monthly expenses? If not, is it part of a broader strategy that includes Social Security, pensions, and investments?
Inflation Protection
Some annuities include cost-of-living adjustments (COLAs), but these often come with lower initial payments. Evaluate whether guaranteed increases are worth the tradeoff.
Liquidity
Annuities often lock up your principal for years. Ensure you won’t need access to the funds for emergencies unless the contract allows penalty-free withdrawals.
Company Ratings
Only consider annuities issued by highly-rated, reputable insurance companies. The security of your income depends on their long-term financial health.
How Annuities Fit into a Broader Retirement Plan
An annuity should never be the only source of retirement income. It works best as a stabilizing element within a diversified plan.
For example, you might combine annuity income with:
- Social Security
- Dividend-yielding stocks
- Real estate income
- Roth IRA or traditional IRA withdrawals
ELVT Financial helps clients balance annuities with these other income streams, ensuring both growth and stability in retirement.
Are There Tax Implications?
Yes. Annuity payments are taxed differently depending on how the annuity was funded:
- If you purchased the annuity with pre-tax dollars (like from a traditional IRA), the entire payment is taxable.
- If you used after-tax dollars, only the earnings portion of your payments is taxed.
Tax strategy plays a huge role in evaluating annuity suitability. It’s one of the reasons why it’s wise to consult a financial advisor or tax professional—especially one familiar with retirement income planning.
We cover many of these topics on our ELVT Financial blog, and you can always contact our team for a personal consultation.
Conclusion: What Is a Good Annuity Rate?
A good annuity rate is one that helps you meet your long-term retirement goals with stability, tax-efficiency, and peace of mind. While current fixed annuity rates between 5.00% and 6.50% may seem attractive, a good rate for you will depend on personal factors like age, health, contract structure, and financial needs.
With annuity rates at decade highs, now may be an excellent time to review your options, upgrade existing contracts, or add guaranteed income to your retirement plan.
At ELVT Financial, our mission is to help you make smarter financial decisions with confidence. Whether you’re shopping for your first annuity or re-evaluating existing plans, we’re here to guide you with education, insight, and strategy. Let’s talk about what a good annuity rate means for your future.
