Ads promising sky-high guaranteed rates are misleading. Real rates around 4% are attractive, expert with AnnuityAdvantage says
MEDFORD, OR / ACCESSWIRE / July 2, 2019 / Can you earn 8 percent on a fixed annuity, guaranteed? Online ads often make this promise.
“Those ads are misleading,” says Ken Nuss, CEO of AnnuityAdvantage, an online annuity marketplace. “Though not completely false, they set unrealistic expectations.”
Some annuities do indeed offer an 8 percent rate guarantee, he says. But there’s a catch. That doesn’t guarantee the annuity’s actual return. Instead, it guarantees the growth of an “income account value” created by an optional rider.
“It’s not money you can withdraw,” he says. “It sounds too good to be true, and it is.”
Buying a lifetime income rider creates the income account value, which grows at a guaranteed annual rate of 4 percent to 8 percent. The income account value is used to calculate the amount of future guaranteed lifetime income payments. Most insurers charge an annual fee of about 1 percent of the annuity value for this option, typically available with indexed annuities.
What can you really earn?
The top rate for a five-year fixed-rate annuity is 4.01 percent, according to AnnuityAdvantage’s online rate database. For a 10-year annuity, it’s 4.31 percent, and for a three-year guarantee, it’s 3.10 percent.
“These are good rates that build savings safely. You don’t need to exaggerate,” he says.
Like bank CDs, multi-year annuities offer a guaranteed rate for a set period of time. But they usually pay substantially more interest than bank CDs of the same duration, Nuss says. Another key advantage: interest is tax-deferred as long as it’s left to compound in the annuity.
Retirement-income expert Ken Nuss is the founder and CEO of AnnuityAdvantage, a leading online provider of fixed-rate, fixed-indexed and immediate-income annuities. It provides a free quote comparison service. He launched the AnnuityAdvantage website in 1999 to help people looking for their best options in principal-protected annuities.
More information, including updated interest rates from dozens of insurers, is available at https://www.annuityadvantage.com/annuity-rates-quotes/multi-year-guarantee-annuities/ or (800) 239-0356.
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