/// By Aviva Sapers
In today’s uncertain financial climate, many Americans are rethinking how to secure reliable income and growth in retirement. With the Federal Reserve having just cut interest rates by .25% and potentially more before year end, investors who rely on bank CDs or money market funds for “safe yield” may soon see those attractive rates fall.
That’s why many retirees are turning to annuities—both for accumulation and for guaranteed lifetime income. Let’s explore why these products may be a good alternative to CDs, money markets and treasuries in 2025.
Accumulation Annuities: A Strong Alternative to CDs and Treasuries
Multi-Year Guaranteed Annuities (MYGAs) function much like CDs: you invest a lump sum, lock in a rate, and know exactly how much you’ll earn. The difference?
- Higher fixed rates: Recent MYGA offerings are in the 5.0%–6.15% range for 3–6 years, depending on the carrier and state. This is generally higher than comparable CD yields for the same duration.
- Longer guarantees: While most CDs run for only a few months or years, MYGAs allow you to lock in attractive rates for longer terms, protecting you if rates drop.
- Tax deferral: Unlike CDs, MYGA’s interest grows tax-deferred until withdrawal, allowing your money to compound more effectively.
For clients worried about reinvestment risk when the Fed cuts rates, a MYGA can serve as a powerful alternative to CDs or money markets.
Income Annuities: 9.5% Guaranteed Roll-Up for 12 Years
If you’re more focused on lifetime income than accumulation, income annuities are worth a serious look. Certain annuities now offer an income rider that guarantees payments for as long as you live even if the account is fully depleted. The indexed variety provides downside protection if the market drops where you don’t lose money and if the market goes up, you participate in some of the upside. This is an attractive feature for those nearing retirement who don’t want to put their assets at risk.
With one particular annuity, it currently offers a 30% bonus to the income account and are presently crediting that account with a guaranteed 9.5% growth rate. This translates into very high guaranteed income payments when you turn on the income in retirement.
When it’s time to begin withdrawals, the annuity converts into a guaranteed paycheck you cannot outlive.
Why this may be for you:
- Compared to the market alone: Unlike equities, annuity income is protected from downturns and sequence-of-returns risk.
- Compared to CDs or money markets: No bank product offers lifetime income—you’d have to continually reinvest, with no guarantees beyond maturity.
- Options: Options like spousal continuation and inflation protection help tailor the income to your retirement lifestyle.
Putting It Together: Growth + Income
- For growth: MYGAs let you lock in higher fixed rates now, before the Fed begins cutting.
- For income: Indexed annuities with lifetime income riders provide guaranteed paychecks for life, with roll-up rates as high as 9.5% on the benefit base.
Together, they can help create a balanced retirement strategy: predictable growth on one side, and lifetime income security on the other.
Important Considerations
- Liquidity: Both MYGAs and income annuities are longer-term products with surrender charges for early withdrawals, thus lacking cash liquidity.
- Taxes: Withdrawals are taxed as ordinary income, and distributions before age 59½ may face a 10% IRS penalty.
- Carrier strength: Always review the financial ratings of the issuing insurance company before purchasing, as the company’s financial strength backs any guarantees.
- Inflation: The fixed rate may not keep up with inflation, thus reducing purchasing power.
The Bottom Line
With interest rates likely heading lower, and life expectancies increasing, annuities deserve a fresh look in 2025. Whether you’re seeking higher fixed yields than CDs or a guaranteed lifetime paycheck, annuities can provide solutions that the market and banks cannot.
As always, it’s best to discuss these strategies with a financial advisor to determine how they fit your personal goals, risk tolerance, and retirement plan.
Today’s Best Multi-Year Guaranteed Annuities (MYGAs) — ImmediateAnnuities.com
