By Marc Gilman
(800) 927-9326 |
“What’s the best annuity?” is one of the most common questions we get, and it’s also the wrong question. Annuity sales have roughly doubled over the past five years, according to LIMRA, an insurance industry research association — more people than ever are looking at these products, and more people than ever are getting confused about which one actually fits their situation. Retirement isn’t one problem — it’s several problems happening at once: money you need to grow safely, money you need to turn into income right now, money you want exposed to some upside without real risk, and money you want generating guaranteed income someday, just not yet. No single annuity solves all four. The better question is: what does each dollar actually need to do?
Key Takeaways:
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There’s no universal “best” annuity — each type is built to solve a different problem, and most annuity types can’t do each other’s job well.
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MYGAs lock in a guaranteed interest rate for a set term, similar to a CD, and are best for money you won’t need for three to ten years.
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SPIAs convert a lump sum into guaranteed income starting almost immediately — the highest payout of any annuity type, but the least flexible.
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Fixed indexed annuities (FIAs) offer growth tied to a market index with a 0% floor, trading full upside for downside protection.
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A GLWB rider on a deferred annuity provides guaranteed income starting in the future, without giving up ownership of the account today. A deferred income annuity (DIA) — sometimes structured as a QLAC inside an IRA — gets you to the same future income goal by annuitizing, typically at a higher payout but with no flexibility once it’s set up.
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Most solid retirement income plans combine two or more of these, rather than putting everything into a single product.
What’s the Right Question to Ask Before Buying an Annuity?
Instead of asking which annuity is best, it helps to ask what job you’re hiring the money for. Do you need guaranteed growth on money you’re not touching for a few years? Income starting this month? Growth potential without the risk of losing principal? Or guaranteed income starting later, while keeping the option to change your mind? Each of those is a different tool, and buying the wrong one for the job is where most annuity regret comes from.
Which Annuity Is Best for Guaranteed Accumulation?
If you have money you won’t need for three to ten years and want a guaranteed return with zero market risk, a Multi-Year Guaranteed Annuity (MYGA) is built for exactly that. It works like a CD: you lock in a fixed interest rate for a set term, and the insurance company guarantees it for the life of that term. As of mid-2026, top MYGA rates have been running in the 5% to 6%+ range depending on term length, meaningfully higher than they were through most of the low-rate years earlier in the decade, and often ahead of comparable CD rates. The trade-off is liquidity: pulling money out early typically triggers a surrender charge, so a MYGA should only hold money you’re genuinely comfortable locking away for the term.
Which Annuity Is Best for Immediate Lifetime Income?
If you need income starting now — to fill a gap between what Social Security covers and what you actually spend — a Single Premium Immediate Annuity (SPIA) is the most direct tool available. You hand over a lump sum, and the insurance company starts sending you a check, typically within 30 days, for as long as you live. Because SPIA pricing benefits from mortality pooling — the insurer is spreading risk across everyone who buys one — it generally offers the highest guaranteed income of any annuity type for a given premium. Payout rates vary by age, gender, and payout option, but in the current rate environment, they’re running noticeably higher than they did through much of the 2010s and early 2020s.
The cost of that high payout is flexibility. A life-only SPIA is irrevocable — there’s no cash value, no getting the lump sum back, and typically nothing left for beneficiaries unless you specifically add a period-certain or joint-life option, which reduces the payout in exchange for that protection. SPIAs work best for people who want to simplify, who are uncomfortable managing a withdrawal strategy on their own, or who specifically want to convert a portion of savings into something that functions like a personal pension.
Which Annuity Is Best for Growth With Downside Protection?
If you want more upside than a MYGA offers but can’t afford to lose principal to a market downturn, a fixed indexed annuity (FIA) sits in between. Your interest credit is tied to the performance of a market index, most commonly the S&P 500, but limited by one of a few common structures. A cap rate sets a hard ceiling on your credited gain regardless of how far the index climbs — cap rates on annual point-to-point strategies have generally run somewhere in the high single digits to low double digits as of mid-2026. A participation rate works differently: instead of a ceiling, you’re credited a percentage of whatever the index actually returns, often somewhere in the 25% to 50% range, with no fixed cap. Either way, if the index goes down, you’re credited 0% for the year — not a loss, just no gain. Which structure is better depends on how the specific numbers compare and how you expect the index to perform, so it’s worth having both quoted side by side rather than assuming one is automatically superior.
One caution worth knowing: an FIA marketed as having “no fees” isn’t actually free — the cost usually shows up as a lower cap or participation rate instead of a line-item charge. There’s no such thing as a genuinely free guarantee; if you don’t see a fee, ask where the cost is actually hiding.
FIAs tend to be more complex than MYGAs or SPIAs, with several different crediting strategies to choose from and surrender periods that often run longer. They’re best suited to money with a seven-to-ten-year (or longer) horizon that you want growing with some real upside potential, without accepting market risk on the downside. If an FIA’s caps feel too limiting, a registered index-linked annuity (RILA) is worth knowing about too — it’s a hybrid that generally offers higher caps in exchange for accepting some, but not all, of the downside if the index falls, splitting the difference between an FIA and a full variable annuity.
Which Annuity Is Best for Future Guaranteed Income?
There are actually two different paths to guaranteed income that starts later rather than now, and they work in opposite ways.
The first is a GLWB rider on a deferred annuity — the type of guarantee we cover in depth in our companion piece on GLWB income riders. Instead of annuitizing, you keep the account and its value, while the rider guarantees a lifetime withdrawal amount based on a separate, protected income base that typically grows on a contractual schedule. This lets you defer the income decision for years — often with a larger eventual payout the longer you wait — without locking in an irrevocable choice on day one. It generally comes at the cost of a lower starting income than an immediate SPIA would provide, plus an ongoing rider charge, but for people who want flexibility and the possibility of leaving something to their beneficiaries, it solves a problem the other three products don’t.
The second is a deferred income annuity (DIA) — essentially a SPIA where you agree today to start payments at a future date you choose, typically five to 20 years out, instead of immediately. Unlike a GLWB, a DIA does involve annuitizing: you’re giving up the lump sum in exchange for the promise of future income, the same trade-off a SPIA makes, just on a delayed timeline. In exchange for waiting, DIAs typically pay more than an immediate SPIA would for the same premium, since the insurer holds and grows your money longer before paying out. The real risk is dying before payments begin — with a standard DIA, that money is simply gone, though a death benefit can typically be added for an extra cost to guarantee your beneficiaries at least recover what you put in. If you fund a DIA with IRA or other qualified retirement money, it’s often structured as a Qualified Longevity Annuity Contract (QLAC) — a specific IRS-recognized category that lets you exclude that portion of your IRA from Required Minimum Distribution calculations until payments begin, which can be a meaningful tax-planning tool on its own.
The choice between the two comes down to the same trade-off as MYGA vs. GLWB or SPIA vs. GLWB: a DIA generally pays more for the same commitment, but it’s irrevocable and leaves nothing for beneficiaries once activated, while a GLWB costs more for the flexibility of keeping your options open and something to pass on.
How Do These Work Together in a Retirement Plan?
The most effective annuity strategy for most people isn’t picking one type — it’s bucketing money by purpose. A common approach for a retiree with $600,000 in investable assets, as one illustration: a portion in a SPIA to cover essential monthly expenses, a portion in a MYGA for guaranteed near-term growth, and the remainder in a diversified portfolio, or an FIA, for longer-term growth. No single product does everything well, but each piece does its specific job effectively. The right mix depends entirely on your income needs, your time horizon, and how much you want available for beneficiaries — there’s no one-size-fits-all split.
Where Does Insurance Planning Fit In?
Matching the right annuity type to the right dollar amount and the right timeline is where a lot of retirement plans go wrong — not because any individual product is bad, but because it was asked to do a job it wasn’t built for. Financial planners who work with annuity buyers regularly note that these products are often sold rather than chosen — pushed as whatever a broker happens to be offering that month, rather than matched to what someone actually needs. That’s exactly why starting from your goal, not from a specific product, matters. It’s also worth verifying who you’re working with and what you’re being told — check that any professional advising you is properly licensed, and treat unverified information, including anything you read online or get from an AI tool, as a starting point for questions rather than a final answer. One distinction worth understanding: a captive agent can only sell products from one company, while an independent agent can shop across multiple carriers to find the product that actually fits — worth asking directly which kind of agent you’re working with. Reviewing your full financial picture, including how Social Security, any pension, and your other assets fit together, is the only way to know how much (if any) of your savings belongs in an annuity, and which type actually matches what you’re trying to accomplish.
What To Do Next
If you’re trying to figure out which of these — or which combination — actually fits your retirement goals, we’re glad to walk through it with you. Call us at (800) 927-9326 or email — no pressure, just straight answers.
By Marc Gilman, Gilman Agency
This information is general in nature and not intended as tax or legal advice. Annuity rates, caps, and payout figures change frequently and vary by carrier, state, and product. Annuity guarantees are backed solely by the financial strength and claims-paying ability of the issuing insurance company. Consult your tax advisor regarding your specific situation.
Sources: Internal Revenue Service, Publication 939 (General Rule for Pensions and Annuities); Vanguard, “Are Annuities Right for Me?”; AARP, “7 Key Things to Know About Annuities,” citing LIMRA industry data; U.S. News & World Report, “Are Annuities a Good Investment? 10 Things to Know Before Buying”; Investopedia, “Ultimate Guide To Buying Annuities for Retirement,” citing Zach Swad, CFP, and Jordan Gilberti, CFP; industry rate reporting on 2026 MYGA, SPIA, and fixed indexed annuity rate trends.
