Annuities are having a moment. With interest rates near multi-decade highs, fixed annuity rates in 2025 are the most attractive they’ve been in over 15 years — some paying over 6% annually, guaranteed. For retirees and pre-retirees looking for predictable income they can’t outlive, annuities deserve a serious look. Here’s what you need to know.
What Is an Annuity?
An annuity is a contract between you and an insurance company. You give them a lump sum (or series of payments), and in return, they guarantee you a stream of income — either for a fixed period or for the rest of your life. Annuities are primarily used to ensure you don’t outlive your retirement savings.
Types of Annuities Explained
Fixed Annuities
Pay a guaranteed fixed interest rate for a set period (typically 3–10 years). Similar in concept to a CD but with insurance company backing. Currently paying 5%–6.5% for multi-year guaranteed annuities (MYGAs) in 2025.
Variable Annuities
Your returns are tied to investment subaccounts (like mutual funds). Higher growth potential but comes with market risk. Best for longer time horizons.
Fixed Indexed Annuities (FIA)
Returns are linked to a market index (like the S&P 500) but with a floor of 0% — you can’t lose principal due to market downturns. Offers upside potential with downside protection.
Immediate Annuities (SPIA)
You make a lump sum payment and start receiving monthly income immediately. Ideal for someone already in retirement who needs guaranteed cash flow now.
Best Fixed Annuity Rates 2025
| Insurer | Type | Term | Rate |
|---|---|---|---|
| Gainbridge | MYGA | 5 years | 6.15% guaranteed |
| American Equity | MYGA | 7 years | 6.05% guaranteed |
| Nassau Life | MYGA | 3 years | 5.85% guaranteed |
| Athene | FIA | 10 years | Up to 8% cap |
| North American | FIA | 7 years | Up to 7.5% cap |
📌 Annuity rates change weekly based on interest rate environments. Always get a current quote from a licensed annuity specialist before making a decision.
How Much Income Can an Annuity Generate?
A $200,000 single premium immediate annuity (SPIA) for a 65-year-old male could generate approximately $1,200–$1,400 per month for life, depending on current rates and the insurer. For a couple, joint life payouts are slightly lower. Use an annuity calculator to see personalized estimates based on your age, gender, and premium amount.
Frequently Asked Questions
Are annuities safe?
Fixed annuities are backed by the financial strength of the issuing insurance company and covered by state guaranty associations (up to $250,000 in most states). They are not FDIC-insured, so choosing a highly-rated insurer (A+ or A from AM Best) is important.
What are the downsides of annuities?
Surrender charges (penalties for early withdrawal), limited liquidity, complexity of some products, and potentially high fees in variable annuities. Fixed and MYGA annuities are generally simpler and more transparent.
Is annuity income taxable?
If purchased with pre-tax money (inside an IRA), the full distribution is taxable as ordinary income. If purchased with after-tax money, only the earnings portion is taxable. Annuities inside a Roth IRA grow and distribute tax-free.
How much should I put into an annuity?
Most financial planners suggest annuitizing no more than 25%–50% of your retirement savings. Keep enough liquid assets outside the annuity for emergencies and flexibility. Never put money you may need soon into an annuity with surrender charges.
