3-Year Fixed Annuity Rates
Short-term annuities can allow you to grow your savings as you near retirement. If you’re searching for a way to minimize risk and add a final bump to your retirement nest egg, a 3-year fixed annuity can be an attractive investment option.
- Written by Anna Baluch
- Edited By
Michael Santiago, CRPC™
Michael Santiago, CRPC™
Senior Financial Editor
Michael Santiago, a senior financial editor, joined RetireGuide in 2023. With over 10 years of professional writing and editing experience, he brings a wealth of expertise in creating content for diverse industries, including travel and healthcare. Having traveled to more than 40 countries across five continents and lived in Europe and Asia for several years, Michael's global perspective enriches his work. He combines his strong writing skills, editorial judgment and passion for crafting accurate and engrossing content to enhance the user experience on RetireGuide.
Read More- Published: December 8, 2024
- Updated: December 12, 2024
- 5 min read time
- This page features 4 Cited Research Articles
- A 3-year fixed annuity offers a guaranteed rate of return on the money you invest over 3 years.
- While you can enjoy a predictable income, you may face costly fees and find it difficult to protect yourself from the effects of inflation.
- Before you decide on a 3-year fixed annuity, shop around and compare your options with reputable insurance companies.
What Is a 3-Year Fixed Annuity?
A 3-year fixed annuity is an insurance contract that promises to pay you a specific, guaranteed rate on your contributions over a 3-year time period. Unlike a variable annuity with a rate that fluctuates based on market performance, a 3-year fixed annuity is predictable and, as a result, less risky. With a 3-year fixed annuity, you can calculate your returns in advance.
How Does a 3-Year Fixed Annuity Work?
After you agree to a 3-year fixed annuity, you’ll contribute money in a large sum or smaller monthly installments or premiums. Your contributions will grow tax-deferred, meaning you won’t owe taxes on them until you withdraw the fund. Once the accumulation phase is over, the distribution phase will kick in, and the annuity company will distribute the payments to you, typically in retirement.
A multi-year guarantee annuity, or MYGA, is one type of fixed annuity that provides a higher fixed interest rate during the entire 3 years. At the end of the 3-year mark, you may choose a new term, surrender the contract or allow the annuity to transfer into a fixed account and earn a minimum rate. Remember that interest rates on 3-year fixed annuities usually depend on market conditions and a company’s financial stability.
Learn More About Your Annuity Options
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Current 3-Year Fixed Annuity Rates
The Federal Reserve impacts federal funds rates, which may have an effect on annuity rates and the rates charged to customers. When the Fed increases rates, you can expect higher annuity rates. On the other hand, when rates go down, insurance companies are more likely to lower rates on annuity products.
| Annuity Provider/Insurer | Product Name | Current Rate for a 3-Year Fixed Annuity |
|---|---|---|
| Athene | MaxRate | 4.70% |
| Corebridge Financial | American Pathway Advisory | 4.70% |
| Pacific Harbor | Pacific Life | 4.20% |
| Aspida | Aspida Advisory MYGA | 5.35% |
Advantages and Risks of a 3-Year Fixed Annuity
Here’s a closer look at the benefits and drawbacks of 3-year fixed annuities.
- Predictable returns: With a 3-year fixed annuity, you can calculate your exact returns using the interest rate you receive.
- Tax-deferred growth: You won’t owe taxes on a 3-year fixed annuity until you withdraw funds, often in retirement.
- Rider options: You can customize your annuity with riders or add-ons depending on the insurance company and product.
- Can be expensive: Surrender charges, administrative fees, and other fees many annuity companies charge can add up quickly.
- Inflation concern: Your interest rate might be unable to keep up with inflation and the increasing costs of everyday goods and services.
- May earn higher returns elsewhere: Depending on your situation, another investment vehicle, such as a 401(k) or IRA may yield better returns.
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How to Compare and Choose the Best 3-Year Fixed Annuity
- Interest rates
- Interest rates allow you to determine the exact return of all your potential options. A higher rate will yield more money at the end of the 3-year term.
- Fees and penalties
- Pay attention to surrender charges and other fees. If you think you may have to withdraw funds early, search for an annuity that offers annual “free” withdrawals or low surrender charges.
- Financial strength
- Research financial strength ratings from AM Best, Moody’s and other reputable third parties. They can help ensure your hard-earned money is in good hands.
- Riders and add-ons
- Explore various riders that may make sense for your situation. For example, a death benefit rider is likely essential if you want your remaining balance to go to a beneficiary after you pass away.
Is a 3-Year Fixed Annuity Right for You?
A 3-year annuity might be worth exploring if you’re nearing retirement and looking for a low-risk way to supplement the retirement income you’ve already built. You can add to your nest egg without worrying about reducing your principal amount and, as a result, enjoy greater peace of mind. Plus, if you know your taxable income will decrease in retirement, a 3-year fixed annuity can lower your tax bill.
A 3-year fixed annuity can be a solid choice for those nearing retirement, offering guaranteed returns and tax-deferred growth. However, consider potential downsides like fees and inflation risk. Take the time to compare interest rates, fees and the financial stability of providers to ensure they align with your retirement goals. This careful approach can help you secure a more comfortable financial future.
Frequently Asked Questions About a 3-Year Fixed Annuity
Editor Norah Layne contributed to this article.
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- Published in AP News, Credit Karma, Fox Business, U.S. Chamber, Point.com, Newsweek, Insurify and Forbes
- Over a decade of professional writing experience in finance
- MBA with a focus on marketing from Roosevelt University
4 Cited Research Articles
- Athene. (2024, October 18). Athene MaxRate: A Multi-Year Guarantee Annuity. Retrieved from https://athenecentral.widen.net/s/k2svcpbfnl/76052
- Corebridge Financial. (2024, September 23). American Pathway Advisory. Retrieved from https://crbgdoc.jaggedpeak.com/getDocument/
- Aspida. (n.d.). This is Aspida. Retrieved from https://aspida.com/assets/40003-Aspida-Advisory-MYGA-Rate-Sheet-vh28E8dh.pdf
- Pacific Life. (n.d.). Rates. Retrieved from https://ria.pacificlife.com/home/rates.html
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