Fixed annuities offer strong protections for people who want a safe and predictable way to save money instead of using a bank or the stock market. They are similar to CDs but come with extra benefits that can be very useful when used correctly.
CDs usually have a maximum term of five years and do not let your money grow tax-free. Annuities, on the other hand, can last longer and delay taxes on earnings until you take the money out. For careful savers with long-term goals who want to pay less tax on their earnings, fixed annuities can be a smart choice.
The following table shows 3-year fixed annuity rates from some of the nation’s top providers. The term of the annuity refers to how many years the initial rate is guaranteed.
Current 3-Year Fixed Annuity Rates
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| Product |
Rate
|
Guarantee Period
|
Surrender Period
|
AM Best Rating
|
|---|---|---|---|---|
|
Security Benefit Life Insurance Company Advanced Choice |
5.00% | 3 Years | 3 Years | A- |
|
American Life & Security Corp American Classic |
5.05% | 3 Years | 3 Years | B++ |
American Freedom Aspire 3 |
4.60% | 3 Years | 3 Years | A++ |
American Pathway Advisory |
5.05% | 3 Years | 3 Years | A |
|
American Pathway Fixed 5 Annuity |
4.60% | 3 Years | 5 Years | A |
|
American Pathway Fixed 5 Annuity |
4.85% | 3 Years | 5 Years | A |
|
American Pathway Fixed 7 Annuity |
4.85% | 3 Years | 7 Years | A |
|
American Pathway Fixed 7 Annuity |
4.60% | 3 Years | 7 Years | A |
Apex MYGA |
4.95% | 3 Years | 3 Years | A- |
Aspida Advisory MYGA |
5.50% | 3 Years | 3 Years | A- |
Case Study: Buying a 3-Year Fixed Annuity
Ron
Age: 64
Amount Invested: $100,000
Ron is 64 years old and plans to retire at 67. With just a few years to go, he is looking for ways to add a final boost to his retirement savings.
Given his age, he isn’t interested in high-risk options or any investment that could negatively affect his principal.
He decides to focus on a 3-year fixed annuity. This product will pay out when he retires, giving him a simple and relatively short-term way to add to his savings.
He purchases the annuity with $100,000 at a guaranteed rate of 5%, which will remain the same each year. Three years later, the value of his annuity is nearly $120,000.
Additionally, the annuity was tax-deferred, allowing Ron to take advantage of the lower tax bracket when he enters retirement.
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3-Year Fixed Annuities vs. Other Term Products
The primary advantage of purchasing a short-term fixed annuity is the ability to increase your retirement savings quickly with little risk.
However, a fixed annuity isn’t the only product or investment that can accomplish this goal.
3-Year Fixed Annuity vs. 3-Year CD
Certificates of deposit, which are typically available through banks and credit unions, can work similarly as a short-term annuity.
With a CD, you deposit money into a locked savings account for a specific period — 3 years in this case — and earn interest on it in return.
However, fixed annuities have features that make them more of a retirement-specific product. For example, a 3-year fixed annuity is generally tax-deferred, allowing you to take advantage of the lower tax bracket you may end up in after retirement.
Annuities are also more customizable, allowing you to modify the product to your liking.
Annuities often provide higher after-tax rates than CDs, but CDs may be more liquid if you need your money back.
On the flip side, CDs may be safer than fixed annuities since they are FDIC-insured. This is something that would likely only come into play if you purchased an annuity from a provider that was struggling financially or whose stability was at risk.
Many clients come to us asking about the safety and reliability of insurance carriers offering fixed annuities. It’s important to research the financial rating and history of the company before making a decision, even when your state offers a guaranty fund that could cover the balance of your contract.
John Stevenson, CFFOwner and Advisor at Stevenson Retirement SolutionsJohn 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.
Zero-Coupon Bonds
Another low-risk retirement savings vehicle is a zero-coupon bond. Unlike bonds that earn interest, a zero-coupon bond essentially earns you money by being purchased at a discount rate and then redeemed for its full value after a set amount of time.
| Zero-Coupon Bond | 3-Year Fixed Annuity |
| Long-term | Short-term |
| Liquid | Mostly illiquid |
| Low risk | Low risk |
A zero-coupon bond can be a solid choice over a short-term fixed annuity if you are farther away from retirement and are confident you will not need access to the money. These bonds often take a decade or more to mature, and changes in interest rates will impact their value.
Both options are generally low risk.
Calculate Your Returns Based on Today’s Best Rates
How We Get Our Rates Data
Annuity.org supplies fixed annuity rates through Cannex — an independent company that provides access to a database of updated annuity products.
We synchronize and update our rates information several times each week using 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 one- to 10-year terms. In addition, we list the carrier that offers the rate and its respective AM Best financial strength rating.
