Growing Safely

What Is a Fixed Annuity? The Plain-Vanilla Original

ALBy The AnnuaLife Team10 min read · Updated September 16, 2026

A fixed annuity is an insurance contract that pays a declared interest rate for a set period, with no market risk to principal. The insurer credits interest, your money grows tax-deferred, and you can later take withdrawals or lifetime income. It is the oldest and simplest annuity type, and it is not FDIC insured. Guarantees rest on the issuing insurer.

A 30-year fixed mortgage is a strange and wonderful thing. The bank agrees to stop guessing about interest rates, you agree to stop guessing about your payment, and for three decades neither of you has to think about it again. Certainty has value, and both sides pay something for it.

A fixed annuity is that exact deal, running the other direction. You hand an insurance company money. The company tells you the rate it will credit and for how long. Then neither of you has to guess.

That is the whole product. Everything else in the annuity world (indexes, caps, buffers, subaccounts, riders) is a variation invented later. If the alphabet soup has been making your head hurt, start here, because the fixed annuity is the original recipe. The full product detail lives on our fixed annuities page; this guide is the plain-English version.

What is a fixed annuity?

A fixed annuity is a contract with an insurance company in which the insurer agrees to credit a stated rate of interest on your money for a stated period, and your principal is not exposed to market movement.

The vocabulary is short, which is one of the product’s real advantages.

Declared rate

The interest rate the insurer announces it will credit. It is set by the company, filed with the state, and applies for a stated period.

Guarantee period

How long that declared rate is locked. On some fixed annuities it is one year. On a MYGA it is the entire term.

Renewal rate

The new rate the insurer declares after the guarantee period ends. This is the number most first-time buyers forget to ask about.

Minimum guaranteed rate

The contractual floor the credited rate can never fall below, no matter how far renewal rates drop. Almost always far lower than the declared rate.

Surrender period

The years during which withdrawals above your free allowance trigger a charge. Covered on the surrender periods page.

How does the declared rate actually work?

The declared rate works in two stages: a guaranteed stretch you agree to up front, and a renewal stretch where the insurer resets the number.

01The insurer declares a rate and a guarantee period

You know both before you sign, and both are in the contract, not the brochure.

02Interest is credited on that rate, usually daily or annually, and compounds inside the contract

No tax is due on that growth in the year it is credited.

03A free-withdrawal allowance runs alongside it

Most contracts let you take a set percentage a year with no surrender charge. (See free withdrawal.)

04The guarantee period ends

On a one-year-guarantee fixed annuity, this happens fast. On a multi-year guaranteed annuity, it happens at the end of the full term.

05The insurer declares a renewal rate

It can be higher, lower, or the same, and it can only fall so far, because the contract’s minimum guaranteed rate is the floor.

06You decide what happens next

Renew, exchange into a new contract, annuitize into income, or take the money. Most contracts give you a window to choose.

The rate that sold you the contract and the rate you will live with in year six are two different numbers. Ask about both.

What is a minimum guaranteed rate, and why is it so low?

The minimum guaranteed rate is the contractual floor beneath the credited rate, and it is set by state nonforfeiture law rather than by marketing.

Where that floor comes from. Most states base annuity minimums on the NAIC’s Standard Nonforfeiture Law for Individual Deferred Annuities (Model #805). Under that model, the minimum nonforfeiture rate is calculated as the lesser of 3 percent per year and a rate tied to the five-year Constant Maturity Treasury, applied to 87.5 percent of the premium paid. The NAIC amended the model in December 2020 to lower the absolute floor to 0.15 percent. Adoption and effective dates vary by state, so your own contract’s number is the one that governs. The point for a shopper is simple: the guaranteed minimum is a legal backstop, not a forecast, and it will look nothing like the rate on the front page of the brochure.

This is exactly why the guarantee period matters so much. A high declared rate guaranteed for one year, sitting on top of a very low contractual minimum, is a different product from the same rate locked for seven years, even though both are “fixed annuities.”

Fixed annuity, MYGA, or CD: what is the difference?

A MYGA is a fixed annuity with the rate locked for the whole term, and a CD is a bank product with different backing and different tax treatment.

	Fixed annuity (annually renewable)	MYGA	Bank CD
Rate locked for	The guarantee period, often 1 year	The entire term, typically 3 to 10 years	The full term
After the lock	Insurer declares a renewal rate	Term ends, you choose what is next	Rolls or matures
Backing	Issuing insurer’s claims-paying ability	Issuing insurer’s claims-paying ability	FDIC insured within limits
Tax on growth	Deferred until withdrawal	Deferred until withdrawal	Taxed each year as earned
Early exit	Surrender charge, possible MVA	Surrender charge, possible MVA	Bank’s early withdrawal penalty
Best for	Flexibility, shorter commitments	Knowing your exact ending value	Short horizons and full liquidity needs

MVA stands for market value adjustment, a rate-based adjustment some contracts apply to early withdrawals. Our MYGA vs fixed annuity guide covers the first two columns in depth, annuity vs CD covers the third, and the MYGA vs CD calculator runs the after-tax math on your own numbers.

What do fixed annuities actually pay right now?

Top multi-year fixed annuity rates in AnnuaLife’s tracked feed sat in the low-to-mid 6 percent range as of September 2, 2026, well above FDIC national average CD rates and above the best nationally available CDs.

6.25%

Top 5-year MYGA rate in AnnuaLife’s tracked ledger, September 2, 2026

4.50%

Best nationally available 5-year CD APY (NerdWallet, September 2026)

1.36%

FDIC national average 5-year CD (FDIC, effective August 17, 2026)

As of September 2, 2026, the top rates in that ledger ran about 6.00 percent for three years (Revol One), 6.25 percent for five years (Wichita National), 6.35 percent for seven years (Aspida), and 6.25 percent for ten years (Revol One). Those are a snapshot of a moving market, refreshed continuously on the rates hub and the MYGA rates page, and availability varies by state.

Two honest caveats belong right next to those numbers. The FDIC national average is dragged down by large brick-and-mortar banks that pay very little, so comparing a top MYGA to the average CD flatters the annuity. And a fixed annuity is not FDIC insured. The extra yield comes with different backing and different exit rules, which is the trade, not a free lunch.

What are the honest downsides of a fixed annuity?

The honest downsides are limited liquidity, a modest ceiling on growth, inflation exposure, and the fact that every guarantee depends on one insurance company.

Your money is committed for the term. Beyond the free-withdrawal allowance, an early exit costs a surrender charge and possibly a market value adjustment. This is not the place for an emergency fund.
The growth ceiling is modest by design. A fixed annuity is a savings contract, not a growth engine. If your goal is to maximize long-term growth and you have decades to ride out volatility, this is the wrong tool, and we would rather say so.
Inflation is the quiet risk. A rate locked for ten years is locked through whatever inflation does in those ten years. Shorter terms and laddering are the usual answers.
Renewal rates can disappoint. On annually renewable contracts especially, year two can look nothing like year one. The minimum guaranteed rate is your only contractual protection there.
Withdrawals are taxed as ordinary income, and timing matters. Growth is taxed when it comes out, and the IRS may add a 10 percent additional tax on withdrawals before age 59 and a half (IRS Publication 575). General education, not tax advice. More on the annuity taxes page.
The guarantee is only as strong as the insurer behind it. Fixed annuities are not FDIC insured and carry no bank or government backing. Every promise in the contract rests on the claims-paying ability of the issuing insurance company, which is why the AM Best rating belongs on your shortlist next to the rate.

Who is a fixed annuity actually for?

A fixed annuity fits a saver who wants a known outcome on money they can leave alone, and who values predictability over upside.

The saver sitting on idle cash

You have money parked in a low-yield account with no job attached to it and a horizon of several years. Locking a rate is the point.

The pre-retiree with a dated need

You know the year you will want this money, and you want a defined number waiting on that date rather than a market outcome.

The CD holder tired of the annual tax bill

You are paying tax on CD interest every April in a meaningful bracket, and tax deferral on the same kind of contract is worth real money.

Want index-linked upside with no market risk to principal instead? That is a fixed index annuity.
Want the full map of the category before you commit to a type? Start with comparing annuity types.
Want the honest reasons to walk away? When not to buy an annuity exists for exactly that.

The fixed-rate mortgage did not become the most popular loan in America because it produced the best possible outcome in every rate environment. It became popular because it let people stop guessing and get on with their lives. A fixed annuity earns its keep the same way. If you want to see what today’s numbers would mean for your specific term, the MYGA rates page is date-stamped and updated, and what is a MYGA covers the locked-term version in full.

See today’s real, date-stamped annuity rates.

See current rates

Frequently asked questions

What is a fixed annuity in simple terms?

A fixed annuity is an insurance contract that credits a declared interest rate on your money for a stated period, with no market risk to principal. Growth is tax-deferred until you withdraw it. At the end of the guarantee period you can renew, exchange, annuitize into income, or take the money out.

What is a declared rate on a fixed annuity?

The declared rate is the interest rate the insurance company announces it will credit, for a stated guarantee period. It is filed with the state and written into your contract. When the guarantee period ends, the insurer declares a renewal rate, which can be higher or lower but cannot fall below the contract’s minimum guaranteed rate.

What is the minimum guaranteed rate on a fixed annuity?

It is the contractual floor beneath your credited rate. Most states follow the NAIC Standard Nonforfeiture Law for Individual Deferred Annuities, which sets the minimum as the lesser of 3 percent and a five-year Treasury-linked rate applied to 87.5 percent of premium, with an absolute floor of 0.15 percent after the NAIC’s December 2020 amendment. Adoption varies by state, so read your own contract.

Is a fixed annuity the same as a MYGA?

A MYGA is a type of fixed annuity. The difference is the length of the rate lock. A traditional fixed annuity may guarantee its rate for one year and then reset annually, while a multi-year guaranteed annuity locks a single rate for the entire term, commonly three to ten years.

Are fixed annuities FDIC insured?

No. Fixed annuities are insurance contracts, not bank deposits. They are not FDIC insured and carry no bank or government backing. Every guarantee in the contract is backed by the claims-paying ability of the issuing insurance company, which is why financial strength ratings matter when you compare two similar rates.

Can you lose money in a fixed annuity?

Not to market movement, because your principal is not exposed to the market. You can still lose value in other ways: surrender charges and market value adjustments on an early exit, inflation eroding purchasing power over a long term, and, in the extreme, the financial condition of the issuing insurer. Those are the real risks to weigh.

How long do fixed annuity terms run?

Guarantee periods commonly run from one year on annually renewable contracts to ten years on multi-year guaranteed annuities. The surrender period is a separate number and is sometimes longer than the rate guarantee. Read both, because a mismatch between them is one of the most common surprises buyers report.

What happens at the end of a fixed annuity term?

You typically get a window to choose: renew into a new guarantee period at the current declared rate, exchange into a different contract, annuitize into a stream of income, or withdraw the money. If you do nothing, most contracts renew automatically, often at a rate you would not have chosen. Calendar the maturity date.