The Best Annuities of 2022 - Caring.com (2023)

According to a 2018 Gallup poll on retirement issues, 61% of investors strongly or somewhatagreethat they want “guaranteed monthly income that will last as long as [they] need it, even if it means [they] have to give up access to some of [their] money.” Many investors view social security and pensions as part of this income, but social security only goes so far and only about 35% of retireeshave a pension. Annuities can often fill the gap that’s left.

Annuities are products sold by insurance companies that guarantee a fixed income for the future. Customers make regular payments now, or a lump-sum payment, and receive regular payments in return down the road. There are a wide variety of annuities and each can be customized to fit the customer’s needs. Annuities can offer immediate payments, tax benefits, rules for disbursing money to beneficiaries, protections against initial investments, and more.

To help clarify the role of annuities in retirement, we’ve created this introductory guide. Below you’ll find information on some of the best annuities companies on the market. These company profiles are focused on Single Payment Immediate Annuities (SPIAs), annuities that require a lump-sum payment and immediately begin to provide income. We also provide information on other kinds of annuities offered by the companies, in addition to helpful definitions and steps for navigating this complicated category of insurance products.

Annuity Basics

Annuities come in many varieties: immediate, fixed, deferred, variable, indexed, and more. The complexity of the annuity market makes it tough to keep the facts straight.

So, before you dive into our list of the best annuity companies, you’ll need to learn or refresh your knowledge of some insurance industry concepts and terminology. The information below isn’t a comprehensive guide to annuities, but it will give you a good start to understanding them.

Main Annuity Types

At the most basic level, annuities are an insurance product designed to give you a lifetime income stream similar to that provided by social security or a pension. This definition of an annuity, however, most closely resembles an immediate annuity, also frequently called an income annuity or a Single Premium Immediate Annuity (SPIA), the type of annuity our reviews focus on. The further away you get from an SPIA, the less the product will behave like a pension or social security.

Below you can view quick definitions of SPIAs and other common annuity types.

• Immediate: With an immediate income annuity/SPIA, the customer gives a lump sum to the insurance company. In turn, the company promises to pay a predetermined amount of income, usually each month, for the rest of the customer’s life. Payments begin 0-12 months after the lump sum is deposited. When the customer dies, the annuity is gone. This kind of annuity lacks cash value and cannot be canceled after the free look period- not even for a fee.

• Deferred: Deferred in the context of annuities means that the customer puts down a lump sum or a series of payments for an annuity, but will need to wait years (anywhere from about 2-20) to access that sum or profits made off of it. If the customer must withdraw funds before the set terms, he or she will face steep surrender charge fees and possible tax penalties.

• Fixed: Many times, an annuity called a fixed annuity may also be referred to as a Multi-Year Guaranteed Annuity (MYGA). These annuities promise a guaranteed rate of return (growth) for a predetermined number of years, as opposed to for a lifetime. Fixed annuities may be able to provide more growth than a similarly structured Certificate of Deposit (CD). At the end of an MYGA’s term, you may be able to “annuitize” the account into an income stream similar to an SPIA. You will face fees when you do so.

• Variable: Variable annuities are an attempt to combine the upsides of the stock market with the security of insurance. Indexed annuities are a type of variable annuity. These policies may make promises of “guaranteed growth,” but they also come with risks of loss. They also are very likely to cap the amount of profit the annuity can make for the customer even when the stock or index is doing well. Variable annuities can be held within an IRA.

Customizations

• Death benefits: A partial or full refund at death given to a named beneficiary in installments or a lump sum.
• Inflation protection: A design in which the annuity payout rises over time to combat the effects of inflation.
• Withdrawal options: A feature that allows the customer to receive more than the allotted monthly payout amount in limited circumstances. Withdrawals may incur tax penalties.
• Joint options: An annuity for two people that lasts until the last partner has passed away.
• Period certain: A guarantee that for a stated number of years, payouts will be made no matter what, including in some cases after the death of the policyholder. Some period certain riders override the lifetime guarantee of the product, however.

Commissions

Most financial and insurance salespeople earn commissions when you sign up for one of their products. This means that a percent (perhaps 0.5%-4.5%) of the lump sum you invest is immediately paid out to the agent or broker you used. Typically a commission is not directly “charged” to you, but it will be reflected in the amount of money that the annuity pays out to you each month.

How We Chose the Best Annuity Companies

A or Better Rating

The extent to which an annuity can supplement your income, in the long run, is based on the financial stability of the company that offers it- not on the government, a bank, or anything else. The stability of the insurance company is paramount, so we have only included companies on our list that have an A or better rating with A.M. Best, an insurance rating agency that was founded in 1899 and that is commonly referenced by financial professionals of all kinds.

SPIA Option Available

Annuities come in many forms and the field of available products quickly gets confusing. We’ve made sure to include companies on our list that have one of the simplest products, the Single Premium Immediate Annuity (SPIA). These are perhaps the least risky for the retiree, have the fewest fees, and are the easiest to understand of available annuity products.

Consumer-Friendly Return Policy

Even with careful research, you may purchase an annuity only to realize later that it isn’t right for you. Unfortunately, many annuities have a shockingly short return period, typically referred to as a “free look” window. It’s extremely common to find free looks that are only 10 days long, if not shorter. We chose to only review policies that have a free look of 20 or more days so that you’ll be less likely to get stuck in a contract that makes you unhappy.

The 7 Best Annuity Companies

Note: All information obtained from Blueprint Income and from insurance company websites during July 2022. Information may differ if you purchase through a different broker or agent, on another date, in another state, or with other crucial details that differ.

New York Life

Best Financial Security

Founded in Manhattan in the mid-1800s, New York Life first served Americans by offering life insurance policies. Many seniors now recognize this company’s name thanks to its long business partnership with AARP. Throughout New York Life’s 175-year history, the company has grown with the times and has begun to offer a broader range of financial products, including annuities. In 2019, Forbes named this company among the Best Employers for Diversity.

New York Life is one of the best possible companies for those concerned with the financial security of their annuities. Not only does this company have an A++ rating from the agencies AM Best and Standard & Poor’s, but it also has a $24.8 billion surplus. This is one of two major insurance companies that refused bailout money in the midst of the 2008 financial crisis, citing its surplus of capital. New York Life’s responsible fiscal management has helped it to thrive even in uncertain times.

Overview of New York Life SPIA

New York Life is a highly respected insurance provider that offers a long free look period of 30 days. Many customers will also appreciate that you can get an annuity here for as little as $10,000. Of course, the monthly payout for such a policy will be low compared to payouts for higher lump sums. With mid-range commissions of 3% and a variety of other annuity products, New York Life offers many opportunities for customers to enjoy a stable income into the latter years of life.

Pros and Cons of New York Life

MassMutual

Best Corporate Responsibility

MassMutual’s origins are rooted in the concept of “living mutual,” that is, caring about others and society as a whole. This brand remains very conscious of its role in communities and takes its corporate responsibility seriously. MassMutual uses matching gifts and volunteer time-off to encourage its employees to volunteer locally. The brand also honors its role in communities by partnering with legal firms to offer pro bono assistance to nonprofits and individuals in need.

Overview of MassMutual SPIA

MassMutual is one of the only companies on our list that offers a SPIA policy with no premium banding. This means that monthly payouts are calculated for a $10,000 lump sum in the same way that they are for a $3,000,000 lump sum. Those who put in smaller amounts won’t be penalized with a smaller percentage of return in their monthly payouts. Below you can find out even more about annuities from MassMutual.

MassMutual offers some of the lowest commission rates on the market, doing as low as 1.8%, and their highest rates are around the industry average of 3%. The company also offers many different annuity products, such as variable annuities, fixed indexed annuities, and deferred income annuities.

Pros and Cons of MassMutual

Symetra

Most Transparent Sales Methods

Symetra knows that most customers aren’t highly educated on insurance terminology. Instead of using customers’ lack of expertise against them, Symetra meets its customers where they are by making its sales materials easy to understand. Through its “Jibber Jabber” campaign, this brand makes a point of clarifying insurance jargon and eliminating it completely whenever possible. The company culture emphasizes honesty and clarity, making it easy for customers to know what they are getting when they buy from Symetra.

Overview of Symetra SPIA

Compared to many other companies on our list that rate as A+ or better, this company does rank slightly lower at just an A rating. According to AM Best’s own website, however, this rating indicates that the company has an “excellent ability to meet their ongoing insurance obligations.” Below you can learn more about commissions and other available annuities.

Symetra charges some of the highest commission rates, topping out at 4%, although these commissions aren’t charged as a direct fee to consumers. The company offers a wide range of annuity products, including index-linked, fixed-deferred, and fixed-index annuities. For customers looking for a variety of risk options, Symetra likely has a product that fits them well.

Pros and Cons of Symetra

Pacific Life

Best for Investment/Savings Beginners

Aside from its many obvious benefits like a good rating from AM Best and a quality SPIA offering, Pacific Life stands out because it offers educational materials for customers who want to learn more about finance. The brand’s website includes an “insights” section full of 4- and 7-minute reads that explain facets of retirement and finance that are relevant to seniors. These commercial articles are an excellent way to learn more about what the company offers, including its annuities.

Overview of Pacific Life SPIA

Pacific Life has an excellent financial rating from AM Best and a great reputation. The company’s commission rates range from competitive (2.7%) to the highest on our list (4.5%). They also offer variable annuities, fixed index annuities, fixed annuities, and deferred income annuities.

Pros and Cons of Pacific Life

Mutual of Omaha

Best for Customized Annuities

When it comes to special features on immediate annuities- or any annuities for that matter- it’s hard to beat Mutual of Omaha. There are at least eleven different ways to combine riders and customize the basic Ultra-Income (SPIA) annuity that Mutual of Omaha carries. Avenues of customization include multiple ways to address the effects of inflation, uncommon “access” features that provide a bit of liquidity for those in crisis, and several more features regarding period certain and death benefits.

Overview of Mutual of Omaha SPIA

Mutual of Omaha is a stable insurance company with a great product selection. Their commission rates of 4% put them on the slightly higher side of commission costs. The company offers income annuities and deferred annuities, with each category featuring a few different options. The number of annuity products offered by Mutual of Omaha helps ensure that nearly any consumer can find an annuity that suits their needs.

Pros and Cons of Mutual of Omaha

Principal

Best Privacy Features

Principal makes a point of keeping its security features up-to-date. Retirees will appreciate being able to read on Principal’s website how every layer of the business has its own security plan. Those working for Principal follow strict policies that keep access to customer information limited, and customers can benefit from security tips and two-factor authentication on certain accounts.

Overview of Principal SPIA

Principal is a well-rated insurance provider that strives to make the purchasing process simple for its customers. With logical, easy-to-read brochures and great insurance product features, this company will suit many seniors. Below you can find critical details on commissions and other annuity products this brand offers.

Principle charges some of the lowest commission rates on the market, ranging from 1% to 3%. As with all commissions, these fees simply lower the payout of the annuity rather than being charged as a fee at signup. The company also sells fixed annuities, indexed annuities, and variable annuities, along with riders such as inflation protection and death benefits.

Pros and Cons of Principal

Securian Financial

Lowest Fees

Securian Financial has the distinction of offering the absolute lowest SPIA commissions on our list. While commissions are a normal part of the insurance industry and many sectors of the financial industry as well, they are often a source of heartache for consumers. Too many consumers have trusted their money to an insurance company only to realize that an outrageous commission has led to unreasonably low annuity payouts. Seniors who are looking for the best deal should consider the low commission and high payout of Securian financial.

Overview of Securian Financial SPIA

Securian Financial offers both low and high lump sum options, and it offers a useful range of customization options. They provide consumers with options such as fixed deferred annuities, fixed indexed deferred annuities, and variable deferred annuities. At 0.8% commission fees on the low end, Securian Financial provides the best rates of all seven companies on our list. Their death benefit rider may push the annuity into a higher commission bracket, but it offers the highest monthly income of the annuities we researched.

Pros and Cons of Securian Financial

The Pros and Cons of Annuities

As with any financial investment product, annuities come with a variety of advantages and disadvantages. Here, we’ll explore the pros and cons of purchasing an annuity.

Annuity Scams: What You Need to Know

Unfortunately, annuity scams are an issue within the industry. Unscrupulous insurance agents have been known to push annuities that are beneficial to themselves and their companies without providing much or any benefit to the customer. Due to the complicated nature of annuities, it can be easy to mislead a buyer into believing that a certain annuity or annuity rider is beneficial when in reality it only benefits the seller.

Three Common Annuity Scams

Here, we’ll go over a few common annuity scams, warning signs that you may be looking at a scam, and tips for avoiding being scammed.

Annuity Scam Warning Signs

As with many scams, there are usually warning signs. Consider these tips to avoid being scammed.

• Limited-time offers: While some insurance companies may offer extra benefits or lower costs for a short time as a sales tactic, these can also be signs of a scam. If an insurance agent claims that signing up today is the only way to lock in certain benefits, you may be looking at a scam.
• “Licensed, certified” agents: It’s very easy for anyone to claim they are “licensed” or “certified” in some way to sell annuities. If a salesperson claims this, you can look up their credentials online using their license or certification numbers. If they refuse to offer these details, they are likely scamming you.
• Requesting payment directly to the agent: A real insurance agent will not request that payments be made directly to themselves. Payments are always made to the insurance company directly, not the agent. If a salesperson requests direct payment or payment sent to a private address, it could be a scam.

Tips to Protect Against Annuity Scams

It’s important to be vigilant against annuity scams. A few simple actions can greatly reduce your chances of falling for a scam.

Check The Company’s Regulatory Status

A legitimate insurance company that sells annuities will be regulated by the financial industry regulatory authority (FINRA). Use their BrokerCheck search tool to see if the agent or company you’re dealing with is in their database.

Speak With A Lawyer

If you’re unsure about the annuity product you’re looking at, it’s best to discuss it with a lawyer who specializes in annuity law. A quick online search can provide you with information on local annuity lawyers who can discuss your options and answer any questions you might have about an insurance company or agent’s annuity products.

Fully Utilize Your “Free Look” Period

Many insurance companies allow you a “free look” period, allowing you 30 to 45 days to change your mind and modify or cancel the purchase. This can be especially useful if you were pressured into making a purchase. Understand how long the period is and use this timeframe to do more research on the company and the product.

Understand The Benefits and Drawbacks of Riders

Annuity riders can be greatly beneficial for some or a waste of money for others. It’s important to understand your situation and needs, then consider the perks and drawbacks of any certain rider. Here are a few examples of annuity riders, benefits, and disadvantages:

Certain annuity riders are worth it to certain people, but it’s important to consider many factors. The policy owner’s age, health status, beneficiaries, long-term care needs, and other retirement investments can all factor into which riders are worth the purchase and which are not.

Steps to Take If You are a Victim of an Annuity Scam

If you have become a victim of annuity fraud, there are actionable steps you can take to fight against it. Consider these options if you believe you’ve been scammed:

Report Payments to Your Financial Institution

If you believe that you made a payment to a fraudulent party for an annuity product, be sure to contact your bank to report the payment. They may need to change your debit card, checking account, savings account, or credit card information.

Report Identity Theft

If you provided a scammer with personal information, such as your social security number, usernames, or passwords, it’s vital that you report potential identity theft. The FTC has a website for reporting identity theft if you believe you’ve been a victim.

Report the Fraud to the Federal Trade Commission

Providing all information about your fraud situation to the FTC can help fight against fraud in the future. Report fraud to the FTC by visiting their fraud reporting website.

Contact a Lawyer

A lawyer that specializes in fighting fraud could help you get some or all of your money back. Reach out to a local law firm and let them know your experience.

Resources to Report Annuity Scams and Assist Victims

Annuity scams can be a major headache, but there is help available for victims. Take a look at the following websites to learn more about annuities, how to report fraud, and how to find legal help.

How to Choose an Annuity Company

Considering the complexity of the annuity market, it may be tempting for you to just take the advice of the salesperson with the simplest pitch and hope for the best. However, taking an active approach to understanding available annuities will be rewarding in the long run. Use our step-by-step guide below to become a more savvy annuity consumer.

Step 1: Understand the Risks of Entrusting Your Savings to an Insurance Company

When consumers hear the promises of growth, income for life, or “limited risk” that various annuities “guarantee”, they may assume that some form of government backing or secondary insurance supports these promises. However, these promises are only as good as the insurance company offering them. If the annuity is variable or in some way tied to the stock market, then the abilities of the annuity to meet expectations are additionally dependent on market performance.

There is a chance that funds you put into an annuity will be lost, particularly if the market crashes or the company goes bankrupt. Due to the above facts, annuities are not always as safe as insurance companies may represent them to be, and they aren’t universally beneficial. Consider the following facts to help you decide if an annuity could be right for you.

Annuities are:

• Profitable for insurance companies: If a deal sounds too good to be true, the sales agent may be sugar-coating the benefits and downplaying the risks. Annuities tend to provide moderate-income streams in old age; they can’t work financial miracles or be 100% risk-free. Insurance companies sell them because they make money from fees and because many people don’t live long enough to gain back the full value of what they invested in the annuity. Be skeptical and ask clarifying questions about what you’re being sold.
• Not the whole picture: An annuity is a possible piece of the retirement puzzle- it’s not supposed to be the whole picture. Financial experts recommend adding no more than 35% of your retirement to an annuity. Placing all or even most of your funds in an annuity will severely limit your access to funds in case of an emergency, leaving you extremely vulnerable.
• Not for everyone: Experts disagree on who should consider an annuity- you aren’t going to find consistent advice if you turn to books, videos, blogs, or even fee-only financial advisors. However, many experts are of the opinion that an annuity is best for those of middle-class income who are concerned about their retirement not lasting them in old age. If you’re nearing retirement and are fairly well-invested in accounts like IRAs and 401Ks, but you are concerned about income gaps, then something like a SPIA may be right for you. If you’re looking for a high rate of growth, an annuity probably isn’t for you.

Step 2: Investigate the Structures of Different Annuities

In an article of this length, it’s impossible to cover every facet of the main annuity types. However, below you’ll find some short explanations of the most basic annuities.

• Fixed Annuity: If you’re looking for growth, you should consider a fixed annuity that promises a moderate rate of return (perhaps 4%) for a set number of years. These annuities invest your money in bonds. You may put down a lump sum or a series of payments, depending on the type. Fixed annuities do not automatically last a lifetime, but they can be transitioned to that type of account if you wish.
• Variable Annuity: A variable annuity is another tool for modest growth that gives you scheduled payments that rise or fall based on investments in a securities portfolio. You may lose money with a variable annuity, and your ability to profit may be capped at a certain percentage. Variable annuities also typically have the highest fees of all annuities.
• Indexed Annuities: An indexed annuity is like a variable annuity in that your payments can rise or fall, but its performance is tied to a particular market index such as the S&P 500. An indexed annuity is often considered a type of variable annuity.

• Income Annuities: Income annuities (SPIAs, immediate annuities) offer the most security but no growth. This means that the only way you can “make money” on this product is if you live to such an age that the cumulative payouts equal more than the lump sum you paid. These annuities offer stable payments that last until death.
• Deferred Annuities: Several kinds of annuities can be modified to include deferrals, waiting periods between your premium payment and the start of regular returns. In some cases, a deferral may be required by the IRS (especially for those younger than 59 ½).

Step 3: Explore Surrender Charges and Taxes

Before deciding which kind of annuity is right for you, you’ll need to understand how the money you’ve invested in an annuity can (or cannot) be accessed at a later date. You also need to learn how tax codes and penalties can influence the annuity. Below you can get a quick recap of both topics so that you’ll know the questions to ask when establishing your own annuity.

Surrender Charges

As alluded to earlier, annuities place restrictions on the cash that you put into them. With immediate annuities, you typically forfeit all rights to the lump sum in exchange for guaranteed lifetime payouts. With variable and fixed annuities, you don’t necessarily go that far, but you will face extremely steep “surrender charges” if you attempt to withdraw your lump sum before 10 years or some other agreed-upon timeframe has passed. A surrender charge is often 10% of the annuity value. Therefore, if you invested $100,000, you might lose $10,000 simply because you want to end the agreement between you and the insurance company early.

Taxes

Annuities are often considered “tax-advantaged” accounts in which taxes are deferred until payments are taken from the annuity as income. However, the exact tax status of these accounts can be influenced by whether or not they were funded from an existing retirement account, what taxes have or haven’t already been paid, what age the policyholder is, and a variety of other factors. It’s crucial that you explore the IRS’s published materials on annuities and that you consult a tax expert such as a CPA as well.

Key resources for understanding annuity taxes:

• Topic No. 410 Pensions and Annuities (article)
• IRS Tax Assistant (interactive)

Step 4: Decide If You Need Riders or Not

Riders are modifications to a basic annuity policy. Most companies offer several riders for each policy, and many (though not all) riders can be combined. A word of caution- some riders (especially forms of period certain) can so radically alter the performance of a policy that the style of the original annuity may cease to be. Not all riders are available for or advisable for all policies. Moreover, a rider will typically cost you, either by lowering the monthly payout you can receive or by attaching an additional yearly or quarterly fee to your account.

Common riders:

• Lifetime: A guarantee that the payments will last until the death of the policyholder. This is standard in SPIAs, but it may be an add-on for some other annuities.
• Death benefits: Typically an annuity is gone after the death of the policyholder. However, a death benefit is an agreement that a certain cash value or percent of the account will pass to a named beneficiary. This could be in a lump sum or in installments.
• Period certain: Period certain is a guarantee that the regular payments will continue for a specified number of years. If you choose just period certain, the payments end after ten years (or however long you selected). If you choose period certain lifetime, then the benefit continues at least until the death of the policyholder. If death occurs prior to the end of the stated period certain, then a beneficiary will receive the remainder of the promised payments. If death occurs after the period certain, then the payments cease at death.
• Inflation protection: Over time, money loses purchasing power through inflation. Some riders attempt to hedge against inflation through percentage-based increases (2%-4% each year), increases tied to other markets or cost of living metrics, or some other form of incremental adjustment.
• Joint options: This may not be a rider, per se, but you can choose to establish an annuity as a joint account along with a spouse or partner. With this option, the annuity is designed for two, and after the death of one partner, the annuity income continues at a reduced rate until the last living partner passes away.
• Withdrawal: Annuities are designed to be illiquid. You are trading access to a lump sum for the prospect of growth or security. However, annuities do sometimes offer limited cash access as an inherent feature or as a rider for an added cost. Withdrawal rules can vary quite a bit; you may be allowed to withdraw 10% without penalty, you may be allowed to access more of the lump sum under certain circumstances such as during an unforeseen illness, or you may be able to take extra “accelerated” payouts.

Step 4: Compare Companies and Read the Fine Print with a Qualified Advisor

Compare at least three of the same annuity type from different companies. If you’re still unsure which kind of annuity you should focus on, compare even more annuities until you get a real sense of what’s available. Even more importantly, don’t make this decision on the advice of an insurance agent alone. Insurance agents aren’t able to recommend alternatives or weigh all retirement possibilities with you since they are only licensed to sell insurance products. You want someone with more perspective. Consult your financial advisor, preferably one that already helps you with your other retirement accounts.

When you get advice from a financial advisor, make sure you understand how that advisor makes money. If your advisor earns commissions, you need to make sure they have the integrity to steer you away from a product that’s not in your best interest even if doing so means they will lose a commission. If you’ve never really considered the suitability of your advisor before or if you need a new one, consult the tips provided in “How to Select an Investment Professional” which was published by the U.S. Securities and Exchange Commission.

Frequently Asked Questions