Question 1

What is a fixed annuity and how does it work?

Accepted Answer

A fixed annuity (MYGA) pays a guaranteed interest rate for a set period — typically 3, 5, 7, or 10 years. Principal is guaranteed — no market risk. Interest grows tax-deferred. Best rates August 2026: 5.00–6.25% from A-rated carriers. Typically allows 10% free withdrawal per year without surrender charges.

Question 2

What is the difference between a fixed annuity and an indexed annuity?

Accepted Answer

Fixed annuity (MYGA): guaranteed rate, certainty. Indexed annuity (FIA): market-linked with 0% floor, potential for higher returns. Neither is a direct stock market investment. Indexed annuity cap rates August 2026: up to 10.50% on 5–7 year terms. Fixed annuity rates August 2026: 5.00–6.25% from A-rated carriers.

Question 3

What are annuity surrender charges and how do they work?

Accepted Answer

Surrender charges are fees you pay if you withdraw more than the free withdrawal amount during the surrender period. Surrender periods typically last 5–10 years. Surrender charge schedules typically start at 7–10% in year 1 and decrease by 1% per year until reaching 0%. Most annuities allow 10% free withdrawals per year without surrender charges. Required Minimum Distributions (RMDs) from qualified annuities are typically exempt from surrender charges.

Question 4

Are annuities a good investment?

Accepted Answer

Annuities are not investments — they're insurance contracts. They're the right tool for one specific problem: guaranteeing you won't outlive your income. Fixed annuities are appropriate when you want a guaranteed return higher than CDs with tax-deferred growth. Indexed annuities are appropriate when you want market-linked growth with downside protection. Immediate annuities are appropriate when you need guaranteed lifetime income now. Annuities are NOT appropriate as your primary growth vehicle if you're decades from retirement and have a long time horizon for market growth.

The only financial product that guarantees you won't outlive your money. Here's when it makes sense — and when it doesn't.

Annuity Options