Annuities in 2026: Income Annuities, MYGAs, Indexed and Variable Contracts, Fees, and What Current Rates Buy

"Annuity" covers products that have little in common beyond being issued by insurance companies. An immediate annuity turns a lump sum into a paycheck for life. A multi-year guaranteed annuity works like a certificate of deposit. Indexed and variable annuities are investment products with insurance features and, often, layers of fees. This guide explains each type, what current rates buy as of September 2026, what the fees and surrender schedules look like, and what protects you if the insurer fails.

Whether to buy one depends on how you plan to spend in retirement. Our retirement income guide covers withdrawal rates, Social Security timing, and required minimum distributions, and our retirement planning guide covers the saving years.

Where the money goes

Americans bought a record $464.1 billion of annuities in 2025, according to LIMRA. Most of that was savings products. Fixed-rate deferred annuities took in $165.3 billion and fixed indexed annuities $127.9 billion, while traditional variable annuities sold $63.1 billion. Single premium immediate annuities, the simplest way to buy lifetime income, sold $14.4 billion, and deferred income annuities $4.8 billion. Together those two made up about 4% of sales. When someone recommends "an annuity," it is worth asking which kind, because the income products are a small part of what is sold.

The main types

FIAs and MYGAs are insurance products regulated by the states. RILAs and variable annuities are also registered securities, so they come with a prospectus and are sold by FINRA-registered representatives.

Income annuities: SPIAs and deferred income

A SPIA is the product that does what most people imagine an annuity does. You pay a premium and the insurer pays you a fixed amount for life. The insurer can pay more than a bond of similar quality because it pools mortality: the money of buyers who die early helps pay those who live long.

Quotes as of September 29, 2026, from Blueprint Income's published table of the best quotes on a $100,000 premium from insurers rated A or better:

The same table shows immediate income of $7,125 a year for a 60-year-old man and $8,796 for a 70-year-old man. The table does not state the payout option; quotes with a cash refund or a guaranteed period pay less than life-only quotes.

A 7.8% payout rate is not a 7.8% return. Part of each payment is your own premium coming back. What you actually earn depends on how long you live. Illustration: a 65-year-old buyer at the women's rate of $7,494 a year, paid monthly.

The buyer gets the premium back after about 13.3 years, at 78. The product pays off best for people who live long, which is why it works as insurance and why it is a poor fit for someone in bad health.

A deferred income annuity pays much more per dollar because the insurer holds the money longer and some buyers die before payments start. It is a way to insure the late years, such as income from 80 or 85 onward, while spending the rest of the portfolio more freely before then.

QLACs

A qualifying longevity annuity contract is a deferred income annuity bought inside an IRA or 401(k). Under the rules in the 2024 IRS regulations, payments must start by 85, and the premium is left out of the balance used to calculate required minimum distributions. SECURE 2.0 removed the old cap of 25% of the account balance and raised the dollar limit, which is $210,000 per person for 2026 under IRS Notice 2025-67.

Illustration: a 65-year-old moves the full $210,000 from their IRA into a QLAC with income starting at 75. At the Blueprint rates above, that buys about $38,424 a year from 75 on at the men's rate, or $35,362 at the women's rate. Their first RMD at 73 would also be about $7,925 lower, before growth, because the $210,000 is excluded from the calculation.

An income floor, worked through

The usual reason to buy an income annuity is to cover essential spending with income that doesn't depend on markets. Illustration, using the quotes above:

• A 65-year-old, priced at the women's rate, has $1,000,000 saved and receives $30,000 a year from Social Security.
• Their essential spending (housing, food, insurance, taxes) is $56,000 a year, leaving a $26,000 gap.
• They also want $24,000 a year for travel and other discretionary spending.

Without the annuity, they would need a 5% withdrawal rate, above the 3.9% that Morningstar's research treats as safe for a fixed 30-year withdrawal. With it, their essentials are covered for life, and market losses would only affect travel. The cost is flexibility: $346,944 is no longer available for emergencies or heirs, and that money is gone if they die early.

The larger weakness is inflation. The SPIA pays a fixed $26,000. At 2.5% inflation, that buys $20,311 in current dollars after 10 years and $15,867 after 20. Some insurers offer payments that rise by a set percentage each year, which start lower. Delaying Social Security, whose payments are adjusted for inflation, is usually the cheaper first step; our retirement income guide shows the math.

MYGAs: fixed rates for a fixed term

A multi-year guaranteed annuity pays a declared rate for a set number of years. As of September 29, 2026, Blueprint Income's rate table listed a best 5-year rate of 6.55% (from an insurer rated A-) against a best 5-year bank CD rate of 4.95%. Among insurers rated A++ by AM Best, the top rate was 5.90% for seven years, and the highest 3-year rate on the page came from an insurer rated B-.

Illustration: $100,000 at 5.90% for seven years grows to $149,373, against $140,242 at 4.95%. Interest is tax-deferred until withdrawn, then taxed as ordinary income, and withdrawals before 59½ generally add a 10% tax penalty. Unlike a CD, a MYGA isn't FDIC insured; the protection is the insurer's balance sheet and the state guaranty association described below. The highest rates usually come from lower-rated insurers, so compare the rate with the rating, not just the rate.

Indexed annuities and RILAs

A fixed indexed annuity credits interest based on an index, usually with a floor of 0%, so a bad year credits nothing rather than a loss. The upside is limited by a cap, a participation rate, a spread, or a combination. The SEC's investor bulletin on indexed annuities gives examples: a 7% cap turns a 12% index gain into 7%, and a 75% participation rate with a 3% spread turns a 10% gain into 4.5%.

Blueprint's indexed annuity page showed a best S&P 500 annual cap of 11.20% on a 7-year contract as of September 29, 2026, and notes that most caps are one-year rates the insurer can change at renewal. That second point matters more than the first. A high first-year cap followed by lower renewal caps is a common pattern, so ask for the contract's minimum guaranteed cap and its renewal history.

Illustration: $100,000 in an FIA with an 11.2% annual cap and a 0% floor, against the index itself, over a hypothetical five years of price returns:

With two down years in five, the floor helped. In a run of strong years the cap would cost far more, and the illustration assumes the cap stays at 11.2%, which the insurer doesn't promise.

A registered index-linked annuity gives up the 0% floor for higher caps. Losses are limited either by a buffer, where the insurer absorbs the first slice of a decline, or by a floor, which limits the most you can lose. Using the SEC's examples, with a 10% buffer a 12% index drop costs you 2%, and with a 10% floor it costs you 10%. The SEC's RILA glossary entry notes that these contracts usually limit both gains and losses and charge for early withdrawals.

Variable annuities and their fees

A variable annuity holds mutual-fund-like subaccounts inside a tax-deferred insurance contract. Investor.gov's variable annuity guide lists the charges:

• A mortality and expense risk charge, which its example sets at 1.25% of account value a year.
• An administrative fee, 0.15% a year in its example.
• The expenses of the underlying funds.
• Charges for optional riders such as guaranteed lifetime withdrawal benefits or enhanced death benefits.
• Surrender charges. In the SEC's example, the charge starts at 7% and falls 1% a year, and 10% of the contract value can be withdrawn each year without a charge. Take out $50,000 in year one from a $100,000 contract and you pay 7% on $40,000, or $2,800.

The SEC notes surrender periods often last six to eight years and sometimes ten or more, and many contracts start a new surrender period for each additional premium. Most contracts also have a free-look period, usually at least ten days, during which you can cancel without a surrender charge.

The tax deferral rarely justifies these costs for someone who hasn't already filled a 401(k) and IRA, because gains come out as ordinary income instead of at capital gains rates. Variable annuities make most sense when a specific guarantee is the point and its cost has been compared with simpler ways to get it. Exchanging one annuity for another can be done without tax under section 1035, but a new contract usually means a new surrender period and a new commission, so ask what the exchange gains you.

Taxes on annuity income

• Annuities bought with IRA or 401(k) money are taxed like any other distribution from those accounts: fully as ordinary income.
• For annuities bought with after-tax money, each payment is split between a tax-free return of your premium and taxable income, using the rules in IRS Publication 939. Once you have recovered your full premium, payments become fully taxable.
• Withdrawals from a deferred annuity are treated as coming from earnings first, so they are taxable until the gains are used up.

If the insurer fails

Annuity guarantees depend on the insurer. Every state has a life and health guaranty association, funded by assessments on member insurers, that continues coverage when a member company fails. NOLHGA's summary of state laws shows the annuity limits vary:

The limits generally apply per person per failed insurer, most states also cap a person's total protection across several policies, and coverage excludes the parts of a contract where the owner bears the investment risk, such as variable annuity subaccounts. Coverage follows the state where you live. If you plan to put more than your state's limit into annuities, splitting the money between insurers keeps each piece within the limit. Check the insurer's financial strength ratings from AM Best, S&P, Moody's, or Fitch before buying.

The sales rules

The Labor Department's 2024 Retirement Security Rule would have made most annuity recommendations involving retirement money fiduciary advice under ERISA. It never took effect: two federal courts stayed it in July 2024, final judgments vacated it, and on March 18, 2026, the department removed it from the Code of Federal Regulations and restored the older five-part test.

In practice, an insurance agent selling a fixed or indexed annuity is held to state rules based on the NAIC's best-interest model, and a broker selling a variable annuity or RILA is held to the SEC's Regulation Best Interest. Neither standard requires the seller to be a fiduciary for your whole portfolio, and many annuity sellers are paid by commission. Our guide to fiduciary standards explains the differences and how to check a seller's record.

Questions to ask before buying

1. What problem is this solving: lifetime income, a fixed return, or market exposure with limits? Does a simpler product solve it?
2. Have I delayed Social Security as far as makes sense? It is usually cheaper inflation-adjusted income.
3. What is the total annual cost, including riders, and the full surrender schedule? Does a new premium restart it?
4. For indexed products: what are the current cap and participation rate, what are the guaranteed minimums, and how have renewal rates changed on this contract?
5. How is the seller paid, and how much?
6. What is the insurer's rating, and how much of my money would be above my state's guaranty limit?
7. What happens to the money if I die next year?

Our guides to choosing a financial advisor and asset protection cover related questions.

This guide is for informational purposes only and does not constitute investment, tax, insurance, or legal advice. Annuity quotes and rates are as of September 2026, change often, and vary by insurer, state, and payout option; get current quotes before buying. Guarantees depend on the claims-paying ability of the issuing insurer. Illustrations use assumed figures and are not forecasts. Consult qualified professionals before buying an annuity.