Fixed Annuities

A fixed-rate annuity is a type of retirement savings product that grows steadily and safely, providing you with a guaranteed* growth rate and the opportunity to convert your account to a lifetime income stream in the future.

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Annuity basics

An annuity is an insurance product that allows you to build tax-deferred assets for retirement or convert some of your retirement savings into a stream of guaranteed income payments that last for life. With the right annuity as part of your retirement strategy, you can remove the risk of outliving your savings.

Related: Guide to annuities

What is a fixed-rate annuity? 

There are two main ways to grow your retirement savings with an annuity. A variable annuity invests your contributions in the market and has the potential for higher returns, but at a greater risk. A fixed annuity is safer, growing at a steady rate that is set when you purchase it. 

Payments for life

One of the more common types of annuities is a lifetime income annuity; with such an annuity you are purchasing financial security. In exchange for a lump-sum payment or a series of premium payments, you will receive a periodic income (usually monthly) for the rest of your life. 

The amount you receive with each installment will depend on how much you’ve contributed into the annuity, but you can get back more than you purchased. The longer you live, the more total income you’ll get, and it will never run out. One thing to keep in mind is that withdrawals from a fixed annuity over an allowed limit may be subject to a surrender charge for a certain period of time. Once the surrender charge period has ended, however, you will have full access to your money. Typically, the surrender charge decreases over a number of years. 

No-risk growth

There are several factors that will affect the interest rate of your annuity, but you can expect average annuity rates between 2.15% to 3.25%** depending on the annuity type. Whatever funds you contribute will grow by that rate every year, without fail, so there’s no risk of loss, as there would be with stocks or mutual funds. 

Companies will offer different rates, so shop around. But it’s important to understand that the annuity with the best rate will not always be the best product. Be sure to weigh other factors, like the financial stability of the company, any fees you may be charged, and potential benefits you can add on to your annuity. An agent can help you understand your options and set expectations. 

Immediate vs. deferred

You can choose to start receiving payments now if you fund your annuity with a lump sum, typically by transferring funds from a 401(k) or other retirement savings. An immediate annuity (also called a lifetime income annuity) is a good way to turn some of your savings into guaranteed payments for life. 

If you’re not yet ready for retirement, you can plan for the future and fund a deferred annuity with a lump sum or periodic premium payments. It will continue to grow steadily at your fixed interest rate until you’re ready to access it later in life. 

What happens to an annuity when you die?

Annuities can be structured in many ways to fit you and your family’s specific needs. With some, payments simply end when the annuitant (owner) dies. Others will continue to pay a spouse or beneficiary for years afterward. At New York Life, annuities can be set up to provide death benefits that pay out the part of the lump sum that has not yet been distributed to a beneficiary when you pass. Customizing your fixed-rate annuity to meet your needs is an important aspect of planning for retirement. 

What is an equity-indexed annuity? 

An equity-indexed annuity grows at a pre-determined interest rate, rather than with investments, but that interest rate is partially tied to a stock index, like the S&P 500 Index. Since there is a minimum guaranteed interest rate with these annuities, there is no risk of losing money. Equity-indexed annuities are newer than the other types, and they are often difficult to compare apples to apples because each company—and sometimes each product—will use a different calculation to decide how the interest rate is tied to the markets. Keep in mind that with equity-indexed annuities you are forgoing the higher return potential of a variable annuity and they typically have high surrender charges. You should discuss what is right for your situation with your agent or financial professional. 

Is a fixed annuity right for me?

Depending on your goals, an annuity can be an important piece of your retirement strategy, but whatever your situation, it probably shouldn’t be your only retirement savings vehicle. A balanced and diversified portfolio is likely the most consistent way to give yourself a fulfilling retirement. As you consider your options, here are a few things to keep in mind.

401(k) and IRAs

Many financial professionals will recommend taking advantage of these common tax-deferred retirement savings vehicles if they are available for you. However, each has a cap on how much you can contribute each year, and the savings aren’t guaranteed to last for your entire lifetime.

Certificates of deposit (CDs)

A CD is another low-risk savings option similar to a fixed-deferred annuity. They are offered by banks and credit unions and work like this: You deposit a lump sum of money for a predetermined period of time—called a term—which is often three months to a year. You can’t use the money during this time. Then, when the term is up, you get the money back, plus interest at the agreed-upon rate. If you can afford to live off just that interest, you can reinvest your principal back into a CD and continue the cycle.

Example scenario: Balancing your portfolio

You are in the prime of your career and have been able to save a decent amount. Most of it is invested in an aggressive stock approach to maximize its growth potential. You believe it will pay off and provide you with a good retirement, but there is still some risk. Purchasing a fixed-deferred annuity can help you balance the risk with dependable savings you know will always be there. 

Example scenario: Securing peace of mind

You’ve just retired. You have a good amount of savings in a 401(k), but you are uncertain how much you should spend every month and how long it will last. You can transfer some or all of those savings into an immediate annuity, which will guarantee you a steady and predictable monthly income you can count on for life.

Both fixed-deferred and immediate annuities can help reduce the risk of outliving your retirement savings. They can provide valuable peace of mind and protect against longevity concerns. Go through your retirement checklist with one of our financial professionals to see if a fixed-deferred or immediate annuity would be a good addition to your portfolio.

Related: Connect with an agent


Want to learn more about life insurance?

A New York Life financial professional can help determine what’s right for you.

*Guarantees are based on the claims-paying ability of the issuer.


Annuities contain certain fees, risks, limitations and restrictions; Please speak with a financial professional for costs and complete details.  Withdrawals may be subject to ordinary income taxes and, if made prior to age 59½, may be subject to a 10% IRS penalty; Surrender charges may also apply.

Please consider the charges, risks, expenses, and investment objectives carefully before purchasing a variable annuity. The prospectus contains this and other information and can be obtained from a financial professional.  Read the prospectuses carefully before you invest or send money.

Annuity products are issued by New York Life Insurance and Annuity Corporation and its parent company, New York Life Insurance Company, 51 Madison Avenue, New York, NY 10010.  All guarantees are dependent on the claims-paying ability of the issuer. Available in jurisdictions where approved.

Variable annuities are offered by NYLIFE Securities LLC, Member FINRA/SIPC, a licensed insurance agency and New York Life company.

Neither New York Life Insurance Company, nor its agents, provides tax, legal, or accounting advice. Please consult your own tax, legal, or accounting professionals before making any decisions.