10 best annuity companies for June 2024 (2024)

Take pushy insurance salespeople singing the praises of annuities and aggressive stock-market types who hate annuities out of your mind. As usual, the truth is somewhere in the middle.
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For the right person, under the right conditions, long-term financial planning with annuities can make sense to provide an additional, steady income stream in retirement.

What are annuities?

An annuity is a contract between an investor, known as an annuitant, and an insurance company. You purchase an annuity with a lump sum or on a payment schedule. Then, usually come retirement, you receive your annuity payout all at once or over time. This is a contractual requirement of an annuity investment.

Why consider an annuity?

• Tax-deferred growth: Earnings, such as interest, in an annuity are typically free from income taxes until you start taking payouts.
• No contribution limits: Unlike IRAs and workplace retirement plans, the IRS doesn’t limit how much money you can invest in an annuity.
• Guaranteed income in retirement: Your insurance company is responsible for paying the income it guaranteed in your annuity contract.
• They’re customizable: Annuitants can add features such as death benefits, a guaranteed minimum income benefit and the option to guarantee income for a surviving spouse.

Types of annuities

• Fixed annuities: Insurance companies guarantee the interest rate and payouts on fixed annuities. You choose how to receive your payout — throughout your lifetime (lifetime annuity) or another time period. Your interest rate can change, though your rate of return is guaranteed.
• Variable annuities: These annuities function more like traditional investments, in that your rate of return depends on market performance. With variable annuities, you choose between “sub-accounts,” mutual fund-like investments in the stock or bond markets or money market funds. You take on risk with a variable annuity, but receive tax-deferred earnings growth, a death benefit and payout options that can supply guaranteed lifetime income.
• Indexed annuities: A fixed-variable annuity hybrid, indexed annuities usually offer a minimum guaranteed interest rate alongside an interest rate tied to a market index, such as the . Indexed annuities are relatively complex investments that offer the potential for larger returns than fixed and variable annuities in exchange for more risk and a less straightforward approach.

State insurance regulators regulate all types of annuities. However, the US Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA) provide national oversight of variable and indexed annuities. Find your state’s insurance regulatory agency on the NAIC’s website.

Why choose an annuity for retirement?

Your appetite for risk, anticipated needs and insurance company guarantees will likely influence your choice between retirement annuities. Further details on fixed, variable and indexed annuities — and their subtypes — will help determine which type of annuity makes sense for you.

• Risk-averse investors have peace of mind in retirement knowing that fixed annuities are immune from stock market fluctuations. You’ll know exactly how much you can expect to receive, which helps make retirement planning more precise. Fixed annuities, Nationwide says, are best for investors “looking for growth without market risk.”
• After the initial savings (accumulation) phase, during which time you pay premiums and your earnings grow tax-deferred, variable annuities provide regular payments in retirement during the payout (income) phase.
• Variable annuity death benefits provide your beneficiary with your full account balance or a guaranteed minimum, whichever is greater. Many variable annuity contracts require you to start taking distributions by a certain age (typically starting at around 85). If you don’t, your insurance company can start making payouts — this is called “forced annuitization” — and eliminate any living or death benefits stipulated in the contract. This is why it’s important to ask questions and read the fine print of an annuity contract.
• “Stepped-up” death benefits set the guaranteed minimum to a specific date, often a point in time when your account balance, due to investment performance, was higher than the total of your premium payments minus prior withdrawals.
• Some annuities offer living benefits, such as increases to guaranteed income in the event of poor market performance or dealing with the risk that you outlive your money, which is possible with some annuities. These optional annuity add-ons are known as riders and often come with additional fees.

Unlike fixed annuities, stock, bond or money market performance matters in variable annuities. This is one reason why the SEC and FINRA regulate variable (and indexed) annuities — because market performance impacts the value of your investment and can result in a loss of money.

Taken together, these features make variable annuities a logical part of a comprehensive retirement plan. You can participate in market upside, receive guaranteed lifetime income and take care of your beneficiary. You just have to be willing to deal with investment risk.

Different types of fixed and variable annuities

Different types of fixed and variable annuities give investors flexibility around how they make payments and receive retirement annuity payouts.

• Deferred annuities: You make premium payments over time and receive your payout at a later date. Deferred annuity payouts can last decades, particularly with deferred retirement annuities.
• Immediate annuities: You receive your payout almost immediately after you buy an immediate annuity. After making a lump-sum payment, your insurance company delivers a consistent flow of guaranteed income for a set time frame. These payments begin within one year of purchasing the annuity.
• Qualified annuities: You purchase qualified annuities with pre-tax dollars, possibly with money from retirement accounts, such as IRAs and 401(k)s. This type of annuity offers tax-deferred growth, but the Internal Revenue Service (IRS) treats withdrawals like ordinary income.
• Non-qualified annuities: You purchase non-qualified annuities with post-tax dollars. Therefore, the IRS only taxes you on accumulated earnings — as taxable income — not your original investment.
• Single-premium annuity: A single-premium fixed annuity requires one payment to your insurance company. Single-premium annuities can be immediate or deferred.
• Flexible-premium annuity: A flexible-premium annuity involves a series of payments. Flexible-premium annuities are always deferred.

As noted earlier, indexed annuities are a relatively complicated type of annuity tied to an index, such as . However, they’re not always associated with such well-known indexes. Plus, the terms and provisions in an indexed annuity contract can be confusing. Like any investment, indexed annuities require scrutiny before you sign papers or send money.

This said, FINRA offers helpful guidance on indexed annuities: “The guaranteed minimum interest rate usually ranges from 1 to 3 percent on at least 87.5 percent of the premium paid. As long as the company offering the annuity is fiscally sound enough to meet its obligations, you’ll be guaranteed to receive this return no matter how the market performs.”

If you’re considering any type of retirement annuity, it’s important to know the distinction between fixed and lifetime annuities. To reiterate, fixed annuities make payments for a fixed time, regardless of how long you live. Lifetime annuities payout until you — the annuitant — dies. Theoretically, you could start taking payments today, die tomorrow and never see another dime come out of a lifetime annuity.

To deal with this obviously undesirable situation, your insurer might let you:

• Add what amounts to a fixed period annuity to your lifetime annuity.
• Receive income until a second annuitant dies.

Our list of the 10 best annuity companies in the US does much of the homework for you to find reputable insurance firms that will help you get into a retirement annuity that makes sense for your specific situation.

Analysis of annuity rates

Annuity rates matter most during the savings phase. During this period, you receive a fixed interest rate on your investment for a specified timeframe. Just like savings and CD accounts, fixed annuity interest rates are higher than traditional savings accounts thanks to the overall high interest rate environment.

According to Annuity.org, the best guaranteed rates are around 6% on 3-year, 5-year and 10-year fixed annuities. Because variable and indexed annuities involve market performance, you will not find a list of fixed, guaranteed rates.

Once you start taking payouts, you receive these distributions over time (or in a lump sum) based on the accumulated balance in your account.

Charles Schwab suggests that, for the right investor in the right situation, an annuity during periods of high interest rates can be a good move. The investment firm advises “starting with between 10% and 25% of your savings for an income annuity, but not more than 50%.” Schwab argues this strategy can “make sense for people who are in good health, concerned about outliving their savings, or value having a predictable income stream (in combination with Social Security payments and their investments).”

How to choose the right annuity company

Our guide to the best annuity companies for June 2024 takes together the most important factors to help you choose the right annuity company and the best annuity for your situation.

Generally, be sure to read the fine print and ask questions. When you consider and purchase an annuity contract, you might be dealing directly with an agent. While this person should have your best interests in mind, remember they’re salespeople. So read all disclosures before committing to an annuity product. Buying an annuity is different from opening an IRA and purchasing stocks or ETFs of your choosing. You’re entering into a contract with an insurance company that includes language and components generally not associated with other types of investments.

Key annuity features to consider

• Fixed or variable: Consider whether you want a fixed rate of interest or payouts that could increase or decrease based on market performance.
• Deferred or immediate: Would you prefer to pay into an annuity over time and receive payments at a later date (deferred) or make a one-time, lump sum payment and start receiving payments shortly thereafter?
• Fixed period or lifetime: Choose whether you want to receive payments for a predetermined length of time, which depend on how much you pay into the annuity, or payments for the rest of your life, which depend on your age. Both types also depend on how much you pay into the annuity and, for fixed annuities, the interest rate.
• Qualified or nonqualified: You can either invest pre-tax money in a qualified annuity or post-tax money in a nonqualified annuity.

Methodology

To construct our list of the 10 best annuity companies in the US, we started with the 71 largest firms based on annual direct premiums sold. From there, we focused on companies that sold $1 billion in annual individual direct premiums or greater and applied the following weighted factors to filter our list to the top 10.

• Comdex composite (30%): Developed by Ebix, the Comdex is not a rating system, but a composite of the ratings given to insurance companies by A.M. Best, Standard & Poor’s, Moody’s, Fitch, Weiss and Kroll Bond Rating Agency.
• Capital ratio (20%): This criterion is a measure of financial stability. Capital ratio indicates an insurer’s capital and surplus as a total of admitted assets. The higher the capital ratio, the better.
• Total individual direct premiums (20%): We ranked insurance companies that sold more annual individual direct annuity premiums higher. Generally, the larger the number of premiums sold, the stronger and more stable the provider.
• Total assets (10%): We ranked companies with greater assets higher, as this is another measure of a company’s strength and stability.
• Number of states & territories (10%): Due to greater accessibility, we ranked insurance companies licensed to offer their annuity products in a larger number of states and territories higher.
• Complaint index score (10%): The NAIC Complaint Index compares performance between companies. Nationally, NAIC sets the index at 1. Therefore, a company with an NAIC Complaint Index score of 2 received two times the number of complaints than expected in the market.

Frequently asked questions (FAQs)