1-Year Fixed Annuity Rates

Current 1-Year Fixed Annuity Rates

Case Study: Buying a 1-Year Fixed Annuity

Choosing the right term for your annuity often boils down to your circumstances. To illustrate how someone might decide to purchase a 1-year fixed annuity, let’s look at the following case study.

Anna has $50,000 in savings and is worried about how inflation might erode the purchasing power of that money over time. She also would like to establish a supplemental income stream in retirement.

However, Anna is concerned about leaving her money locked up in an annuity for many years. She wants to be able to pull her money out and put it somewhere else if rates for other savings products become more favorable.

For all these reasons, a 1-year fixed annuity might make the most sense for Anna. She can grow her savings to keep pace with inflation while maintaining some liquidity and the ability to cash out her annuity at the end of the year.

1-Year Term vs. Other Term Options

A 1-year term is usually the shortest term you can find for a fixed annuity. After the one-year guarantee period has elapsed, you’ll have the option to renew your contract, possibly at a higher or lower rate, or cash out your annuity with the interest it earned.

Generally speaking, the longer your fixed annuity’s term is, the higher your guaranteed interest rate will be. Because of this, a 1-year fixed annuity might not be right for someone who wants to maximize accumulation.

“Short-term annuity rates are not competitive,” licensed insurance agent Jonathan Varner told Annuity.org. “I’ve not had anyone very interested in a 1-year [annuity] and most of those people are going to their banks and doing CDs.”

1-Year Annuity vs. 1-Year CD

Consumers looking for low-risk savings vehicles often consider both fixed annuities and certificates of deposit (CDs). This holds especially true when choosing a short-term option like a 1-year term.

The basic concept of these two products is similar; you pay a lump sum to the issuing organization, which holds onto that money for a certain period, and at the end of that term, you can get the money back along with a guaranteed interest rate.

Both fixed annuities and CDs are principal-protected investments, so there’s no risk of losing your money. The guaranteed protection of a fixed annuity is based on the insurer’s financial stability, while CDs are insured by the Federal Deposit Insurance Corporation (FDIC). 

As of early 2024, CDs have fixed annuities beat for guaranteed interest rates on short terms. “Right now, a 1-year CD is going to beat a 1-year annuity,” Nick Pangakis, a financial advisor with Capitol Financial Solutions, told Annuity.org. “You can get a 13-month CD for [5.5%] right now and you can get a 1-year annuity in the high fours.”  

However, when comparing annuities and CDs, it’s important to consider more than just the interest rate. For example, annuities offer the unique feature of annuitization, in which your premium and interest convert into a stream of income payments. You can often turn your fixed annuity into lifetime income, an option not available with CDs.

Another great benefit to purchasing an annuity over a CD is that they are generally protected from creditors and liens. I have many clients who reach out to me for that very purpose. Even if you are worried about a situation where Medicaid would require liquidation of assets prior to receiving benefits, an annuity would be protected versus a CD that would not be.

John Stevenson, CFFOwner and Advisor at Stevenson Retirement Solutions

John Stevenson, a Certified Financial Fiduciary®️, specializes in securing retirements with tax-free accounts. With a focus on guaranteed retirement, he’s ensured none of his clients suffer from market fluctuations. As a renowned educator and podcast host, John empowers thousands weekly, sharing his expertise in minimizing taxes and protecting against financial downturns.

How We Get Our Rates Data

Annuity.org supplies fixed annuity rates through Cannex — an independent company that provides access to a database of continuously updated annuity products.

We synchronize and update our rates information several times each week with the newest Cannex data to help ensure you have access to the most recent interest rates available.

Annuity.org features regularly updated rates for fixed annuities from 1- to 10-year terms. We also state the carrier that is offering the rate, along with that company’s AM Best financial strength rating.