What Is a Fixed Annuity? Types, Safety and How They Work (2026)

What is a fixed annuity?

A fixed annuity is a contract between you and an insurance company. In exchange for your deposit, the insurer guarantees a set interest rate and promises your principal will not shrink because of a bad year in the market. Your balance grows without a yearly tax bill, and at the end of the process you can turn it into income that lasts as long as you live. The insurer is the one absorbing market risk here, not you, which is the entire point of the contract.

It helps to think of "fixed annuity" as a family name rather than a single product. Some members of that family simply grow a lump sum at a guaranteed rate. Others exist purely to turn savings into a paycheck. One even ties its growth to a market index while still refusing to let your principal fall. Picking the right one starts with knowing all five, which this guide walks through in order.

What are today's best fixed annuity rates?

Fixed annuity rates track the broader interest rate environment fairly closely, because insurers invest the bulk of your premium in bonds. When bond yields climb, the rates carriers can afford to credit climb with them, and the reverse is true when yields fall. Because that backdrop shifts from week to week, we do not print a rate table on this page; instead, use our fixed annuity calculator to model a term and rate you are considering, and get a same-day quote for the actual numbers available in your state.

One planning point matters more than any single number: once you lock a fixed annuity's rate for its term, that rate holds even if the broader market moves lower afterward. A buyer who commits during a period of comparatively strong rates keeps that yield for the life of the contract, which is why timing purchases around the rate environment, rather than chasing the single highest number on a given day, tends to serve buyers better over the long run.

Rate cycles in this space tend to run in multi-year stretches rather than reversing week to week. Periods of unusually low bond yields eventually give way to periods where carriers can credit noticeably more, and the reverse happens too. A saver who understands roughly where the cycle stands, rather than fixating on whichever single carrier is briefly on top of a rate table, is generally better positioned to pick both the right term and the right moment to buy.

Best fixed annuity companies by 2025 sales

A small group of carriers write most of the fixed annuity business sold in the United States. According to LIMRA's sales data, the ten companies below combined for roughly $92.2 billion in fixed-rate deferred annuity sales in 2025, a little more than half of the record $165.3 billion the category did for the year. Athene has now topped this sales list three years running, and among these ten, the highest financial-strength grades belong to New York Life and MassMutual.

The remaining 44% of the market is spread across dozens of smaller carriers, and it is common for one of them to lead a given term's rate comparison on any given day. That is one reason it is worth comparing quotes across a wide panel of carriers rather than defaulting to the biggest name. Our best fixed annuity companies guide goes deeper on ratings, product lineups and who each carrier fits, and the full company directory covers everyone else.

What are the types of fixed annuities?

Every fixed annuity does one of two jobs: it either grows a deposit (accumulation) or it turns a deposit into income (distribution). Five products split those two jobs between them.

The three accumulation products

Traditional fixed annuity. This one guarantees a rate for an opening stretch, usually one to three years, and then the carrier declares a new rate every year after that. Every contract also carries a guaranteed minimum interest rate the insurer can never dip below, no matter how low market rates go. Most traditional fixed contracts are flexible-premium, meaning you can keep adding money as the years go on.

MYGA, the multi-year guaranteed annuity. A MYGA locks one rate for a chosen term of 3, 5, 7 or 10 years and never changes it during that stretch. It is the closest thing in the annuity world to a bank CD, generally paying a bit more with the added benefit of tax-deferred compounding, and it is the best-selling fixed annuity on the market today. Our full MYGA guide covers the mechanics in depth.

Fixed index annuity (FIA). An FIA credits interest based on how a market index, commonly the S&P 500, performs, with a 0% floor so a losing year never reduces your principal. Your upside is trimmed by a cap, a participation rate or a spread, so a strong index year typically credits you only part of the index's gain while a losing year simply credits zero. Our fixed index annuity guide covers crediting methods in detail.

The two income products

SPIA, the single premium immediate annuity. You hand the insurer a lump sum, and income generally starts within a year, often within about a month. It suits retirees who want dependable monthly income for core living expenses, with the tradeoff being that the decision is usually permanent once made. Our income annuity guide walks through how payouts are calculated.

DIA, the deferred income annuity. A DIA works the same way as a SPIA except the start date is pushed out, anywhere from two to roughly forty years. The longer you wait, the bigger each payment becomes once it starts, since the insurer has more time to grow the deposit and fewer expected years of payments to cover once income begins. Inside an IRA, a DIA can be structured as a Qualified Longevity Annuity Contract, or QLAC, which lets you push up to $210,000 of qualified money past the usual required-distribution age, as late as age 85, trimming taxable distributions during your early retirement years.

Both income products trade flexibility for certainty. Once payments start, most contracts cannot be unwound, so it is worth deciding in advance how much of your savings you actually want converted into income versus kept liquid for the unexpected.

Our types of annuities guide lays every category, fixed and otherwise, side by side.

How does a fixed annuity work?

Every deferred fixed annuity, meaning every one except a SPIA, moves through two stages.

Accumulation. Your deposit grows at whatever rate the contract guarantees for its term, and you owe no tax on that growth year to year.

Payout. Once the term ends, you can take the money as a lump sum, renew with the same carrier at a new rate, move it tax-free into a different contract through a 1035 exchange, or annuitize it into income for life.

Most fixed annuities credit compound interest, meaning your interest earns interest of its own the following year. A smaller number instead credit simple interest, which is calculated only on your original deposit every year. Compounding usually produces a larger balance over a full term, though a higher simple rate can occasionally pay more if you plan to withdraw the interest annually rather than let it build. Our simple versus compound interest calculator lets you compare the two side by side for your own numbers.

Single-premium versus flexible-premium

A single-premium contract is funded with one deposit and never added to. MYGAs, SPIAs and DIAs are almost always structured this way, which makes them a natural landing spot for a CD, an IRA or a 401(k) rollover.

A flexible-premium contract starts with an initial deposit but lets you contribute more over time. This structure is common on traditional fixed annuities and fits someone building savings gradually out of ongoing income, such as a small business owner adding to the contract whenever cash flow allows rather than funding it all at once.

How are fixed annuities taxed?

Interest compounds without tax inside the contract, and you only owe the IRS when money actually comes out. Exactly how it is taxed depends on how the contract was funded.

Non-qualified money (already-taxed dollars). You are taxed only on the earnings, never on your original deposit. Withdrawals from a deferred contract come out earnings-first, so they are fully taxable until the gain is used up. Once you annuitize, each payment splits into a taxable earnings piece and a tax-free return of principal using what is called the exclusion ratio. Pulling out gains before age 59 and a half adds a 10% IRS penalty on top of ordinary tax.

Qualified money (an IRA or 401(k) rollover). Every dollar you withdraw is taxed as ordinary income, since the original contribution was never taxed. The tax deferral a fixed annuity provides is redundant inside a retirement account that already defers tax, so the real reason to use one there is the guaranteed rate, the principal protection, and the option to turn it into lifetime income. RMDs begin at age 73.

What tax deferral is worth in dollars

Here is a hypothetical case to illustrate the point. Diane just turned 58, sits in the 24% federal bracket, and has $150,000 coming free from a CD that matured. Putting that sum into a taxable account earning a hypothetical 5.30% each year, taxes owed annually knock her real return down to about 4.03%, so five years out she would have roughly $182,700. Sending the same $150,000 into a 5-year MYGA locked at that same 5.30% lets it compound with nothing owed along the way, building to close to $194,200 by the time the term ends. Even after she settles the tax bill on the $44,200 she gained, she still nets around $183,600, and choosing to spread the withdrawals across several lower-income years afterward would let her keep even more.

Are fixed annuities safe?

Fixed annuities are not FDIC insured, because an insurance company issues them, not a bank. What backs them instead is a two-layer system with a strong record.

Your state's guaranty association. Every state runs one, and it steps in if an insurer becomes insolvent, typically covering somewhere between $100,000 and $500,000 per person, per carrier.

The carrier's own financial strength. AM Best is the standard rating agency here, and A- or better is a reasonable bar to set. S&P, Moody's and Fitch cover a smaller slice of carriers but are worth checking too when a company holds more than one rating. For deposits above your state's guaranty limit, splitting the money across two carriers under different parent companies is a sensible way to stay fully covered.

A rating measures the company's ability to pay claims, not whether a specific product fits your goals, so treat the two questions separately. Confirm any rating directly with the agency before you sign anything, since ratings do get revised. For a full breakdown of the guaranty system, see our guide to whether annuities are safe.

Understanding surrender charges

Surrender charges are what carriers ask in exchange for the higher rate a fixed annuity pays. Locking in your rate for the full term means the insurer is counting on the money staying put, and a surrender charge is the mechanism that discourages an early exit. A typical 5-year schedule looks something like this.

The charge only applies to withdrawals above your annual free amount, commonly 10% of account value, so staying within that allowance means you never pay one. Most contracts also drop the charge altogether for a buyer who moves into a nursing home or receives a terminal diagnosis. Our surrender charge guide covers the full mechanics, including how riders can change what counts as free.

Fixed annuity versus CD versus bond

People frequently compare a MYGA to a bank CD, since both guarantee a rate and protect principal. The real differences show up in rate, taxes and flexibility, not in the basic guarantee. Here is the shape of the comparison using clearly hypothetical, rounded figures.

A MYGA has historically paid somewhat more than a comparable CD, but the bigger story is usually taxes and flexibility. A CD matures and simply hands you cash and a tax bill. A fixed annuity gives you the choice to withdraw, renew, exchange into a different annuity, or start lifetime income, frequently without triggering a taxable event at all. See our fixed annuity versus CD comparison for more detail.

Who should buy a fixed annuity?

A fixed annuity tends to be a good fit if you:

• Are within striking distance of retiring, say 5 to 10 years out, and a loss of principal is not something you can absorb
• Are holding a maturing CD and want a potentially higher guaranteed rate with tax deferral
• Need guaranteed income that a SPIA or DIA can provide for life
• Sit in a higher tax bracket and want more control over when you pay tax
• Have more than $250,000 parked at one bank and want to diversify past the FDIC limit

It tends to be a weaker fit if you might need the full balance before the term ends, are decades away from retirement with a high tolerance for risk, or would be locking up the only liquid savings you have. Keeping 6 to 12 months of expenses in cash before you buy is a sound rule regardless of which type you choose, and a licensed strategist can help you size a deposit that leaves that cushion untouched.

How to buy a fixed annuity

The process typically takes 15 to 30 minutes of actual paperwork.

• Compare quotes across several carriers for the term that lines up with when you expect to need the money, rather than settling on the first offer you see.
• Check the carrier's ratings from AM Best, S&P and Moody's, aiming for A- or better.
• Complete the application, usually done electronically with your ID and beneficiary details on hand.
• Fund the contract, whether from a bank account, another annuity through a 1035 exchange, or an IRA rollover.
• Use the free-look window, commonly somewhere between 10 and 30 days, to read through what was actually issued and walk away without a penalty if it misses the mark.

We can compare a fixed annuity you are considering against other top-rated carriers side by side, working with a licensed strategist rather than a call center, at no cost to you. Our guide to buying an annuity walks through each step in more detail.