What is an annuity rate?

An annuity rate is the percentage by which an annuity grows each year. Annuity rates are determined by insurance companies. The annuity return rate depends on how much money is invested, how the interest is credited and the length of the contract. Insurance companies set annuity rates and may determine a guaranteed rate for a set period.

Why are annuity rates so difficult to compare?

Annuity rates are tricky to compare because, as previously mentioned, different types of annuities earn interest in different ways. For example, traditional fixed annuities guarantee an interest rate for a one-year term, whereas other fixed annuities guarantee rates for anywhere from three to 10 years.

What are the different types of annuities?

There are two other types of annuities to choose from: variable annuities and fixed index annuities. If you buy an annuity, it’s usually a multi-year investment for a considerable amount of your money. If you cancel before the end of the annuity term, you could owe a substantial penalty known as a surrender charge.