4-Year Fixed Annuity Rates
As you approach retirement, short-term annuities can allow you to add a bit more cushion to your nest egg. If you prefer to avoid high risky investments and like the guarantee of predictable income, a 4-year fixed annuity may be worthwhile.
- 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
- 6 min read time
- This page features 5 Cited Research Articles
- A 4-year fixed annuity offers guaranteed returns on the money you invest over 4 years.
- While you can enjoy predictable income, this type of product will likely come with high fees and won’t account for inflation.
- It’s a good idea to shop around and compare 4-year fixed annuities from different insurance companies.
What Is a 4-Year Fixed Annuity?
A 4-year fixed annuity is a tax-deferred financial tool that offers a guaranteed rate of return on your principal for 4 years, protecting you from the ebbs and flows of the market. Compared to variable annuities with fluctuating interest rates, fixed annuities typically have lower fees. They’re far more predictable, giving some investors greater stability and peace of mind in retirement.
How Does a 4-Year Fixed Annuity Work?
Often offered by an insurance company, a 4-year fixed annuity is a contract that allows you to make lump sum or regular contributions during the accumulation phase. Once the 4-year period is up, the distribution phase will kick in and give you the chance to make withdrawals. You can receive annuity payments for a set number of years or for the remainder of your life, depending on the terms of your policy.
Note that interest rates for 4-year annuities depend on a number of factors, such as market conditions and a company’s financial strength. For comparison, a 4-year annuity comes with tax deferral options, whereas CDs are more liquid. If you’re looking to supplement your retirement income, an annuity would make more sense than a 4-year CD, which may be better suited for a short-term goal.
*Ad: Clicking will take you to our partner Annuity.org.
Current 4-Year Fixed Annuity Rates
The Federal Reserve plays a critical role in federal funds rates, which influence the rates banks, insurers, and other companies charge their customers. When Fed rates go up, rates for 4-year fixed annuities are likely to increase as well. On the contrary, when Fed rates decrease, 4-year fixed annuity rates also tend to go down.
Annuity Provider/Insurer | Product Name | Current Rate for a 4-Year Fixed Annuity |
---|---|---|
Farm Bureau FInancial Services | Simple Select Fixed Annuity | 3.25% |
DPL Financial Partners | Advanced Choice | 4.90% |
New York Life | Secure Term Choice Fixed Annuity II | 3.95% |
Oceanview | Harbourview MYGA 4 | 4.70% |
Pros and Cons of a 4-Year Fixed Annuity
Before you move forward with a 4-year fixed annuity, it’s important to consider its benefits and drawbacks.
- Guaranteed returns: A 4-year fixed annuity earns a set return. This means you can easily predict how much you’ll earn after 4 years.
- Tax-deferred: With a 4-year fixed annuity, you’ll only pay taxes when you withdraw funds. If you believe you’ll be in a lower tax bracket during retirement, tax-deferred investments are a huge plus.
- Customizable: Some annuity providers offer a variety of riders and add-ons. You may be able to customize a 4-year fixed annuity to meet your unique goals and preferences.
- Surrender fee: If you pull funds from a 4-year fixed annuity before the 4 years is up, you may owe a surrender fee. While each company is different, many of them will charge a percentage based on the amount you withdraw.
- Inflation risk: Inflation is bound to happen. Unfortunately, fixed returns from 4-year fixed annuities might not be able to keep up with inflation.
- Can earn higher returns elsewhere: You may be able to accumulate more money with another type of investment. Even though a 401(k) is more risky, for example, it typically yields better returns.
*Ad: Clicking will take you to our partner Annuity.org.
How To Compare and Choose the Best 4-Year Fixed Annuity
- Interest rates
- Ideally, you’d choose an annuity with a competitive interest rate. After all, a higher rate means more money in your pocket once the 4-year contract expires.
- Financial strength
- There are countless annuity providers on the market. Choose one with strong financial strength ratings from reputable third-parties, such as Moody’s and AM Best.
- Surrender charges
- Surrender charges can be expensive. If you think you’ll withdraw funds before the 4 years is up, find an annuity with free withdrawals or low surrender fees.
- Add-ons and riders
- Riders like death benefit riders and disability riders can allow you to tailor a 4-year fixed annuity to your particular goals. Pick an annuity with rider options that apply to you.
Is a 4-Year Fixed Annuity Right for You?
Let’s say you’re 61 years old and plan to retire in four years, at age 65. You’re seeking a low-risk way to boost your nest egg. In this case, a 4-year fixed annuity may be a solid choice. This is particularly true if you can find one with a competitive interest rate and riders or add-ons that apply to your future goals. With a 4-year fixed annuity, you won’t have to worry about losing your principal and can approach retirement planning with a clear mind.
A 4-year fixed annuity can be a good option for those looking for a low-risk, predictable way to grow their savings with guaranteed returns. While it may not offer high returns or protect against inflation, it provides tax deferral and stability, making it an attractive choice for individuals nearing retirement. Be sure to compare rates, financial strength and any potential fees before choosing an annuity that aligns with your financial goals.
Editor Norah Layne contributed to this article.
Connect With a Financial Advisor Instantly
Our free tool can help you find an advisor who serves your needs. Get matched with a financial advisor who fits your unique criteria. Once you’ve been matched, consult for free with no obligation.
5 Cited Research Articles
- J.D. Power. (2023, October 12). Satisfaction with Life Insurance and Annuity Products Climbs as Customers Embrace Digital, J.D. Power Find. Retrieved from https://www.jdpower.com/business/press-releases/2023-us-individual-life-insurance-annuity-studies
- DPL Financial Partners. (n.d.). MYGA Marketplace. Retrieved from https://www.dplfp.com/products/products-overview/myga-marketplace
- Farm Bureau Financial Services. (n.d.). Annuity Interest Rates. Retrieved from https://www.fbfs.com/financial-services/investments/annuities/interest-rates
- New York Life. (n.d.). Weekly Rates. Retrieved from https://www.nylannuities.com/resources/rates
- Oceaview. (n.d.). Harbourview Multi-Year Guaranteed Annuity. Retrieved from https://oceanviewlife.my.salesforce.com/sfc/p/