Why Now Might Be a Good Time  to Look at a Fixed Annuity

In 2021, a five year guaranteed annuity paid a little over 2%. This week the strongest five year contracts on the board are paying north of 6%. Between those two numbers sits a decade of rate history, and the market is currently near the top of it. In September 2026 the Federal Reserve raised interest rates for the first time since 2023, and the ten year Treasury has been running near 5.2%, its highest reading in years. Insurers price guaranteed contracts off bonds like that one, which is why a quote you receive today looks nothing like the one you may have set aside a few years back. For comparison, the best five year CD in the country is paying 4.5% to 5%. If you are reviewing fixed income this fall, that gap is the story worth telling.

Here is the part most people miss. A fixed annuity is not a bet on the market. It is a contract with a specific number written into it.

What you are actually buying

Strip away the jargon and the product is simple. You place a lump sum with an insurance company. In return, that company credits a set interest rate to your money for a set term, usually somewhere between two and ten years, and it returns your principal at the end of the term if you leave it alone. The industry calls it a multi year guaranteed annuity, or MYGA. Some carriers market it as a fixed rate deferred annuity. It is the same thing.

Three features set it apart from most of what you already own. The rate is locked, so it does not move when markets do. The growth is tax deferred, so nothing is reported and nothing is taxed until you take money out. And the promise is made by the insurance company that issued the contract rather than by the federal government. That third point deserves attention before you sign anything, and we come back to it below.

Why the rates look the way they do

Annuity rates are not set by a marketing department. They follow the bond market. Insurance companies buy long dated bonds and other fixed income assets to back the guarantees they make, so when yields on those assets rise, carriers can credit more interest to you. When yields fall, the offers shrink.

The backdrop right now is unusual. On September 16, 2026, the Federal Reserve raised its target rate by a quarter of a point to a range of 3.75% to 4%. It was the first increase since 2023, the vote was unanimous, and the Fed pointed to inflation that remains above its 2% goal. Bond yields followed. The ten year Treasury has been trading around 5.2%, against roughly 4.1% a year earlier, and it recently touched its highest level in years.

That shows up directly on the rate boards. In the second week of October, the strongest five year guaranteed contract was paying 6.45%, a ten year contract came in at 6.50%, and one seven year contract was advertised at 7.10% on a simple interest basis. Carrier strength varies widely across that list, and the gap between simple and compound interest can quietly erase the advantage of a higher headline number.

Put it in context. As recently as 2021, a five year guaranteed annuity paid a little over 2%. Rates on that term have stayed above 6% every year since 2023.

The comparison most people make

A fixed annuity behaves much like a certificate of deposit. You deposit money, you earn a stated rate for a stated term, and your principal is protected. So the comparison is fair to make.

Illustrative, based on market data from early October 2026. FDIC coverage applies per depositor, per bank, for each account ownership category.

On yield, it is not close today. The best five year CD rates are running in the neighborhood of 4.5% to 5%, while the national average five year CD pays closer to 1.4%. A five year guaranteed annuity is paying in the mid 6% range.

There is a second difference that never appears in an advertised rate. For money held outside an IRA, CD interest is taxed every year whether you spend it or not, while annuity interest is not taxed until you withdraw it. That deferral keeps the full balance compounding instead of a reduced one.

And then there are the two things a CD gives you that an annuity does not. An annuity carries no FDIC coverage. It stands behind the claims paying ability of the insurer, and it has a surrender period during which an early withdrawal can cost you. Neither product wins by default. They are built for different jobs.

The catch worth knowing about

Here is where the highest number on the page stops being the best answer.

The top of most rate boards is often held by carriers with weaker financial ratings, because pricing a higher rate is one of the few ways a smaller company competes for business. That pattern showed up again this week. The strongest five year rate on the market came from a carrier rated B minus, while the A rated carriers sat lower on the same term. No federal agency stands behind an annuity guarantee, so the strength of the company making the promise deserves the same scrutiny as the rate it quotes.

Three more details are worth checking on any contract. Some advertise a simple interest rate, which credits interest only on your original deposit, so a 7.10% simple contract can pay less over time than a lower rate that compounds. Some pay a generous first year rate that steps down afterward. And when the guaranteed term ends the contract renews at whatever the carrier offers at that moment unless you act, which makes a company's renewal history a fair question to ask.

Most contracts allow you to withdraw about 10% a year without a charge, and some allow interest only in the first year. Anything past that during the surrender period triggers a penalty, and certain contracts also apply a market value adjustment.

If an insurer ever failed, state guaranty associations provide a backstop. In most states that coverage is $250,000 in present value per owner, per insurer, and the limits vary from state to state.

Why the timing question is real

Two things are true at once. The rates available on guaranteed contracts are near multiyear highs, and nothing promises they will stay there. A contract signed this month locks its rate for the full term, so a decline in yields later does not touch you. Waiting for a better number is a legitimate strategy, but it is a bet on direction, and nobody has won that bet reliably.

The market offers a hint about how people are weighing the tradeoff. Annuity sales in the United States set a record at $464.1 billion in 2025, and the second quarter of 2026 set another record at $123.9 billion. That was the eleventh quarter in a row above $100 billion. LIMRA, the research group that compiles those figures, points to roughly 4.1 million Americans turning 65 each year, many of them without a pension to lean on.

You do not have to move quickly. You do have to know what is on the board before the board changes.

Frequently asked questions

• Is a fixed annuity the same as a CD?A fixed annuity and a CD both offer a stated interest rate for a stated term, but they differ in who backs the guarantee, how earnings are taxed, and how accessible your money is. CDs have FDIC insurance within applicable limits. Fixed annuities are backed by the issuing insurance company and usually have a surrender period.
• Why are fixed annuity rates higher right now?Insurance companies use long dated bonds and other fixed income assets to support their guarantees. Higher yields on those assets can support higher rates on new annuity contracts.
• Can I take money out of a fixed annuity?Most contracts permit a penalty free withdrawal of about 10% per year, though terms vary. Larger withdrawals during the surrender period may trigger a surrender charge, so always review the contract before committing.
• Are fixed annuities FDIC insured?No. Annuities are backed by the financial strength and claims paying ability of the issuing insurance company. State guaranty associations may provide limited protection if a licensed insurer fails, and coverage limits differ by state.