Annuity Rates in California

The following table shows rates for fixed annuities in the state of California. A fixed annuity earns a guaranteed interest rate for a set number of years, sometimes referred to as the annuity’s term. When the term elapses, the owner can cash out their annuity or convert it into a stream of income payments.

Buying an Annuity in California

According to the state’s insurance department, California is the largest insurance market in the country and the fourth-largest insurance market in the world. The state is considered a prime market for annuity prospects because the demographic most likely to purchase annuities – residents aged 45 to 64 with over $100,000 in household income – make up 18.2% of California’s total population.

“Annuities can be excellent products for helping Californians plan for retirement and live during their non-working years,” George F. Shave III, a Retirement Income Certified Professional (RICP^®), told Annuity.org.

During the purchasing process, it’s important to ask questions and thoroughly examine your contract.

“I would advise clients to be sure they understand the terms of the annuity contract they are buying,” Shave said.

Before your purchase is finalized, you will have a free-look period, which allows you to review your contract and cancel, if necessary. The free-look period is 30 days for senior residents in California. This is higher than many other states offer and it is an advantage to California residents.

Another significant benefit of purchasing an annuity in California is the lower surrender charges. Many Californians who contact me to buy annuity contracts are pleasantly surprised to learn that if they were to surrender their policy early, the charges would be much lower compared to those in neighboring states.

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.

Annuity Regulations in California

The California Department of Insurance (CDI) governs all annuity providers licensed in the state; its core mission is consumer protection. California has a few laws on the books that work towards this mission.

California’s annuity laws include Senate Bill 60, which put in place a code of conduct for financial advisors. SB60 also placed restrictions on annuity advertising practices, presenting annuities in clients’ homes, and how insurers can invest variable annuity premiums while the contract is in its free-look period. 

The bill also required financial advisors to receive continuing education about annuities. “California was the first state in the nation to mandate annuity training for advisors,” Shave said. “It started with an initial eight-hour training requirement and continues each license renewal with four hours of ongoing training. The goal here is to assure that we are putting better advisors in front of consumers.”

In 2011, California passed the Annuity Adequacy Bill or AB 689, which requires annuity providers and agents to ensure that an annuity or insurance product is appropriate for the customer by evaluating “suitability requirements,” including the purchaser’s age and income, as well as their financial needs, objectives and time horizon.

Another annuity consumer protection bill was signed into law by California’s governor Gavin Newsom in March 2024. Senate Bill 263 strengthens existing regulations by requiring insurance agents to act within the consumer’s best interest when recommending or selling annuity products and mandating insurers to provide a buyer’s guide to all consumers who purchase an annuity.

California is one of many states in which annuities have some protection from creditors. The state’s asset protection laws offer some exemptions for annuity contracts both before and after annuitization.

For unmatured life policies, including annuities, the exempt amount is $13,975 for an individual or $27,950 for a married couple. However, courts can levy a financial judgment beyond these dollar amounts.

Benefits from matured annuity policies are exempt to the extent that they’re reasonably necessary to support the debtor, their spouse and dependents. If you buy an annuity in California while you’re a resident of the state, the agreement is governed by California law — even if you later move to another state with different asset protection rules.

Annuity Taxation in California

California is one of a handful of states that impose a state premium tax on annuities. The tax applies to both qualified and non-qualified annuities, but the two types are taxed at different rates. The non-qualified annuity premium tax rate in California is 2.35%, while qualified annuity premiums are taxed at only 0.50%.

Whether you have a qualified or non-qualified annuity, California’s premium tax only takes effect once you annuitize your contract.

Early retirement plan withdrawals are subject to a 10% federal penalty. California assesses an additional 2.5% penalty on early distributions. 

California residents also have a state income tax. It ranges from 1% to 14.4%, depending on filing status and taxable income. The state doesn’t tax Social Security benefits, estates or inheritances, but annuity payments are considered taxable income.

California Annuity Resources

As you consider your annuity options in California, review the company’s ratings to gauge the financial stability of the provider. A financial advisor or annuity expert can answer your questions and guide you in the right direction as you pursue your financial goals.

To learn more about California annuities, visit:

• California Department of Insurance
• California Annuities Guide for Seniors
• California Life Insurance and Annuities Guide
• California Life and Health Insurance Guarantee Association