Comparing annuities can be a real challenge, especially when insurance companies highlight all the same features. Even when advertised rates grab your attention, you may not be able to tell which annuity offers the best value at first glance.
Knowing how to compare annuities doesn’t have to be complicated. All it takes is looking at the differences between a few key details, like terms and fees. Digital-first Gainbridge Flex sets a strong example of a transparent product that’s easy to compare, with one fixed rate, a disclosed fee and surrender charge schedule, and an online application.
In this guide, you’ll gain all the information you need to build a simple, repeatable process for evaluating annuity contracts.
How do you compare annuities?
Annuity comparisons look at more than just which one has the highest rate. To really understand which product fits your goals, you need to line up the same features across each contract. Comparing 2 annuities with different term lengths or 2 different kinds of annuities misses a lot of nuance.
You can compare annuities yourself through an online comparison tool like AnnuityAdvantage, published third-party reviews, or guidance from a licensed insurance producer {Footnore this: references to outside publications are not endorsements of any product.] You can also look at each annuity providers’ website and compare their offerings directly.
Start by looking at the same annuity type with the same term length. From there, review features that influence overall value, like surrender period, available riders, and any free withdrawal allowance. This helps you identify meaningful differences between annuities instead of basing your decision on a single feature.
This guidance is for informational purposes only. It is not intended to provide, and should not be interpreted as, individualized investment, legal, or tax advice.
What to compare: 6 key features
The interest rate may be the first thing that catches your eye, but it’s only one piece of the puzzle. You should also compare the following 6 features to see the annuity’s full value.
1. Guaranteed rate and term
The guaranteed minimum rate is the lowest interest rate a fixed annuity is contractually obligated to credit over a specified period, and the term is how long the guaranteed rate stays in effect. If you’re comparing indexed or variable annuities, you won’t find any information about guaranteed rates, because they’re unique to fixed annuities.
When shopping for an annuity, always look at products with the same term length to help you make a fair comparison. Otherwise, the math on how much interest you may earn in a set window won’t line up.
2. Surrender period and charges
The surrender period is the time when you could pay a fee for withdrawing more than the allowed amount, or for ending the contract early. During this period, you may face surrender charges for canceling or withdrawing your money.
Some annuities may even apply a market value adjustment (MVA) that increases or decreases your surrender value and death benefit based on interest rate changes at the time of withdrawal; a negative MVA can reduce the amount you receive below the premium you paid. Whether a lower rate with a shorter surrender schedule is preferable to a higher rate with steeper charges depends on your time horizon and liquidity needs.
3. Fees and riders
There are several different kinds of fees and charges you may find across annuities, from commission and annual maintenance fees to surrender charges and mortality and expense (M&E) fees. Each kind of charge varies in size and impact depending on your account type and provider, too.
The more complex the annuity, the more likely you are to have fees (and the higher they’re more likely to be). Many fixed rate annuities, such as a multi-year guaranteed annuity (MYGA), have no explicit annual fee, but surrender charges and any market value adjustment still apply. Indexed annuities are more likely to have fees, and variable annuities are most likely. Variable annuity charges vary by contract and typically include mortality and expense risk charges, administrative fees, underlying fund expenses, and optional rider charges. Review the product prospectus for the specific charges that apply.
Optional riders for enhanced income or death benefits can come with additional costs. Pay attention to those added fees and how they affect the annuity’s overall value, not just the rate, when you’re reviewing contracts.
4. Issuer financial strength
A financial strength rating, provided by independent agencies like AM Best, measures an insurer’s ability to meet its financial obligations. All guarantees are subject to the claims-paying ability of the issuing insurance company. Ratings are opinions of that ability and are not guarantees, and they may be revised or withdrawn at any time. Look into the issuer’s rating, too, to see if they tend to meet their commitments, however, note that ratings are opinions of that ability and are not guarantees, and they may be revised or withdrawn at any time.
5. Payout and income options
Annuities offer several payout options, like single or joint income, period certain payments, and different start dates. As you’re comparing options, consider whether you’ll need to cover 1 person or 2, whether you want to be paid over a set period, and when you want those payments to begin. The right choice comes down to your personal goals and timeline.
6. Liquidity: The free withdrawal allowance
For annuities, free withdrawal allowance means you can take out a portion of your money (often a small percentage of the contract value) each year without triggering surrender charges. Amounts withdrawn above the free withdrawal allowance are subject to surrender charges and any market value adjustment. Withdrawals are taxed as ordinary income and, before age 59½, may be subject to an additional 10% federal tax penalty.
How to compare annuity rates the right way
A higher rate doesn’t necessarily mean you’re getting a better annuity. It doesn’t matter if your plan has a high rate if you can’t access the money when you need it.
The most important points to consider alongside the advertised rate are the contract term, surrender schedule, and insurer’s financial strength. A product with a higher rate may include a longer commitment or include more restrictions on withdrawals to compensate, for example. More liquidity means more flexibility, and a shorter contract closes the gap between you and the income you may need.
A side-by-side annuity comparison checklist
Finding the right product is a lot easier when you use the same annuity comparison chart or checklist for every option. Before making a decision, review the key features that impact the annuity’s value and ability to support your financial plans:
- Annuity type: Are you comparing the same types of annuities?
- Guaranteed rate: If you’re deciding between fixed annuities, what’s the contract’s interest rate?
- Subaccount choice: Variable annuities offer subaccounts, which carry market risk and may lose value; Carefully review the various subaccount options.
- Term length: How long is the interest rate guaranteed?
- Surrender schedule: How long is the surrender period, and what charges apply?
- MVA: If included, how could an MVA affect withdrawals?
- Fees and riders: What optional benefits could you add, and do any costs apply?
- Issuer financial strength: How strong is the insurance company’s financial position?
- Payout options: What income choices are available (i.e., single or joint options)?
- Free withdrawal allowance: How much can you withdraw before surrender charges come into play?
- Minimum premium: What’s the minimum amount necessary to purchase an annuity?
Comparing fixed annuities vs. other types of annuities
When comparing annuities, it’s important to understand how each product determines returns. Fixed rate annuities are usually the easiest to compare because they provide a guaranteed interest rate for a specific period. You can weigh that rate against other features, like fees and liquidity, without the added complexity of market-based returns.
Variable and fixed indexed annuities work differently from fixed rate annuities. Variable annuities are influenced by stock market performance, and their contract values may decline; fixed indexed annuities credit interest using an indexing method with participation rates, caps, and spreads, together with an index term and reset frequency, and do not participate directly in the market. Since these features vary more widely between contracts, comparing potential returns from variable and fixed indexed annuities will require a closer look.
How Gainbridge FlexSM makes comparison simple
The best annuity comparisons start with clarity. When you can quickly see what a product offers and what it costs, you spend less time reading through the fine print and more time focusing on what your money is financing.
Gainbridge puts transparency at the forefront with a clearly defined rate, a disclosed fee and surrender charge schedule, and a self-directed online experience that keeps all the contract details in one place. With no confusing product bundles and no pressure from an agent or broker, you can review the information at your pace and easily compare Gainbridge FlexSM to other fixed annuities.
Make sense of your annuity options with Gainbridge
For the most reliable annuity comparison, look beyond the rate at the full contract. By lining up the same features across options, you’ll get a better idea of the benefits and tradeoffs to find an annuity that truly fits your financial goals.
Check out the current rate for Gainbridge Flex℠ — no sales commissions and no annual contract fee; surrender charges and any market value adjustment apply as described in the contract — and compare it for yourself.
FAQ
How can I compare annuity rates?
To compare annuity rates, look into details that impact value and how you access your money, like the contract term, surrender schedule, and insurer’s financial strength. Studying all these features together gives you a more accurate picture of the best fit for your needs than just looking at the rates.
What should I look for when comparing annuities?
Check on the guaranteed rate, contract term, and surrender charges when comparing annuities. At the same time, pay attention to factors like payout options and free withdrawal allowance, which can make a big difference if your financial needs change. Comparing the same features across similar annuities makes it easier to assess your annuity contract options.
What’s the most important factor when comparing annuities?
There isn’t one feature that matters most for every purchaser. The best comparison takes the whole contract into account, so you can see which option fits your goals and financial situation.
How can I know if an annuity is a good deal?
An annuity may suit your needs when its rate, liquidity provisions, and charges align with your time horizon (or non-monetary costs like long contract terms or payout blocks). Compare all the details of each annuity contract to determine whether it delivers long-term value or short-term appeal.
Is a higher annuity rate always better?
A higher rate isn’t necessarily better, as it may come with a longer surrender period, higher charges, or less flexibility. Comparing more details than just the advertised rate gives you insight into which product actually has the best overall value.
This article is for informational purposes only. It is not intended to provide, and should not be interpreted as, individualized investment, legal, or tax advice. The Gainbridge Flex® digital platform provides informational and educational resources intended only for self-directed purposes.
