Best Highest Annuity Rates Compare Annuities Providers

An explanation of annuity rates

When you shop for and compare annuities, there are several different rates you want to consider to determine what’s best for your retirement needs. Click Quote Save offers a free comparison service that automatically compares the most important rates for purchasing an annuity and matches you up to these providers. Here is a rundown of the rates that may determine how much income your annuity may provide for your retirement:

Payout rate. The annual income you receive from the annuity is called the payout rate. If you are purchasing an annuity primarily for the income potential, this is the key rate to consider in your decision.

If you purchase an immediate annuity, the payout rate is a percentage of the total amount of premium you paid upfront. For example, if you invested $100,000 in an immediate annuity with a 6 percent payout rate, you would receive $6,000 annually until you pass away. If you purchase a deferred annuity, the payout rate is a percentage of the annuity’s account value at the time you begin income. In the case of lifetime income, payout rates are computed using actuarial tables that take into account the life expectancy of the annuitant.

Accumulated rate. If you purchase a deferred annuity whereby you will delay taking income from a number of years, it’s important to know how much interest will be credited to the contract each year. This will largely depend on the type of annuity you buy.

• A fixed annuity credits a fixed rate of interest each year for a established period of time. If your buy an annuity for $100,000 that guarantees a 4 percent compounded rate of growth each year for 10 years, the contract’s account value will be $148,000 at the end of that period.

• With a variable annuity, you direct the insurance company to invest those funds in one or more subaccounts, which are mutual-fund like investments. The money in those subaccounts will increase or decrease over time, depending on their performance.

Indexed annuities earn interest based on the movement of a market index, giving them the ability to grow higher in value than fixed annuities that charge a flat rate of interest. However, you are not actually invested in the market or in any index. The insurance company simply uses the index as a measuring stick for how much to credit to your contract. Indexed annuities also have a provision whereby the contract cannot lose value based on how the corresponding index performs.

Surrender rate and free withdrawal rate. If you decide to remove some or all of your money from your annuity before its surrender period, you will likely have to pay a surrender charge. This is typically a percentage of the amount withdrawn. The percentage will decline over time. For example, your annuity may have an 8 percent surrender charge if you withdraw funds in the first year, a 7 percent charge in year 2 and a 6 percent charge in year 3.

Many annuities, however, offer a free withdrawal percentage. This provision allows you to take out a percentage of the annuity’s value without a charge. A typical free withdrawal amount is 10 percent of the account value.

Cap rate. Applicable to indexed annuities, a cap is a ceiling on interest rate growth. Because indexed annuities do not lose principal, there has to be a limit on their upside. As an indexed annuity holder, you’re essentially trading unlimited interest rate growth for the protection against negative returns.

If your annuity’s crediting strategy has a cap of 8 percent, its account value can not increase more than 8 percent in any one period, regardless of how much the benchmark index increases. If the index increases 5 percent, your account value will increase 5 percent. If the index climbs 12 percent, the account value will be limited to 8 percent.

Participation rate. This is another rate used to limit the upside growth on indexed annuities. If your annuity’s indexed strategies have a participation rate, it refers to a percentage of the growth of the overall benchmark index will be credited to your account value. For example, an annuity with a 50 percent participation rate will credit half of the index’s growth, regardless of how much it increases. So if the benchmark index increased 20 percent, the annuity would earn 10 percent.

Renewal rate. Once your annuity’s initial guarantee period expires and you’re still deferring income until a later date, the insurer will reset the interest rate that is credited to the contract.

The new rate, called a renewal rate, will somewhat depend on the performance of the insurer’s investment portfolio. If the yield on the portion of the portfolio that funded the original investment has dropped considerably because of lower rates, the company will likely lower the renewal rate.  After all, the yield on the assets backing the annuity has dropped. This can happen even though short term rates may have increased. In this situation, advisers may recommend cashing out the original annuity, provided it’s beyond its surrender period, and buying a new annuity at a higher crediting rate.

Oftentimes, an annuity’s renewal rate will correspond with the prevailing interest rate at the time of renewal. That means if interest rates have risen since the time you purchased the annuity, your contract will begin earning a higher rate of interest upon renewal. The same holds true if interest rates have declined since purchase.

Roll-up rate. If you added an income rider — also known as a Guaranteed Minimum Income Rider — to your annuity, you will want to know its roll-up rate. This is the amount the rider’s value increases annually until you turn on the income stream. Roll-up rates can either be compound interest or simple interest.

Unlike the main annuity’s account value, the rider’s value is just that: a value. It is not an account you can access. You can not take free withdrawals from the income rider and you will never be able to receive a lump sum of the income rider value. An income rider’s account value is essentially the number that will determine how much income the rider will provide by using a payout percentage of that value.

Finally a free comparison of all top annuity providers in one place. We cover their annuity rates, rate of return, and ultimately how much money each company will provide you in return for your investment.

Below is a free comparison of the top rates annuity providers and their rates of returns for 2014. This in depth study should shed light on which annuities providers can provide you with the most guaranteed income in your retirement. We analyze the different annuity programs including fixed annuities, variable annuities, and hybrid annuity programs. You can easily calculate below your retirement income from our chart. Since this is from 2014 the list has changed and there are new interest rates of return for our 2015 annuity providers. By completing the short form below we will put you in contact with a local licensed annuity broker/agent who can secure a top rate for you at no charge. We offer this as a free comparison service for anyone over the age of 50 looking to potentially move their retirement funds into an annuity account in the US.

Data above comes from Barrons website.