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Policy Matters

Second Quarter 2022


Sing-along Annuity Time! Your toes will be tapping. You may even sing along as you read about today’s rates.

“I'm coming' up so you better get this party started” - P!nk

“Mm I get high with a little help from my friends” - The Beatles

“Can you take me high enough to fly me over (fly me over) yesterday?” - Damn Yankees

It can be stated (or sung) in a number of ways, but the bottom line is this: Annuity interest rates are on the rise. What does that mean for your annuity clients?

Interest rates increasing may not be great for many factors of the economy, but they are good for insurance companies. For any non-variable policies, insurance companies are fairly limited in their investment portfolio to predominantly fixed-rate sources (primarily investment grade debt instruments). Lower interest rates mean lower crediting rates on Universal Life or Whole Life, and prolonged low rates lead to increased pricing for new policies like Term (especially longer-duration policies).

Over the last year, we’ve had a few hints at higher interest rates, but often no significant action was taken so rates dipped down or stayed stagnant. But (at least as of today) rates have been on a fairly steady incline since the beginning of the year. See one carrier’s rates for a 5-year Fixed/Guaranteed Single Premium Deferred Annuity.

Fixed Rates 5/21/21 6/29/21 7/6/21 8/12/21 9/29/21 10/29/21 11/22/21
MYGA Account 2.70% 2.80% 2.80% 2.65% 2.65% 2.65% 2.80%
Fixed Rates 1/29/22 2/18/22 3/29/22 4/14/22 4/20/22 5/11/22 5/23/22
MYGA Account 2.80% 3.05% 3.25% 3.60% 3.60% 3.75% 3.75%

So we’re back to the age-old questions:

“Are rates going to continue to go up?”
“Should my clients wait before considering an annuity?”

For years, we’ve been waiting for rates to go up. And they finally have. When interest rates rise, insurance companies become more generous with higher lifetime annuity payments. Your clients who purchase an annuity today will earn more than one bought just a couple of months ago. This increase in annuity payments also means your clients can create more safe income in their retirement income plan. It’s generally accepted that for every quarter percent Fed rate hike, the income from an annuity will increase by 1.5%.

Your clients may now be waiting for rates to go up even more. But they could come down. Given that rates are about 1% higher than a year ago, and while inflation was abnormally high recently, the FOMC expects the Personal Consumption Expenditures inflation rate to be 2.7% in 2023, with other agencies predicting around 2.5%; locking in a higher-than-expected-inflation rate of 3.6% looks pretty sound for a portion of a client’s fixed asset bucket. And maybe a systematic two- to three-year layering approach helps with some risk reduction. Instead of a $300k annuity today, we lock in $100k this year, $100k next year, etc.

And hopefully, as the late, great James Brown said, rates will continue to:

“Get up, (get on up). Stay on the scene.”

If you want to talk annuities, get in touch with Jerry Skapyak (or 877-254-4429). Just don’t ask him to sing.


Term Life Insurance | Low-Load Universal Life (Individual & Survivorship) | No Lapse Guaranteed Univeral Life (Individual & Survivorship) | Long Term Care Insurance | Disability Insurance | Critical Care Insurance | Low-Load Variable Annuity | Immediate and Fixed Annuities | Low-Load Variable Universal Life | Hybrid Life/LTCi | Hybrid Annuity/LTCi

(We recommend low-load permanent life insurance and annuities when possible)

(Not all policy types available in all states)

For a list of current providers, visit the Advisor Tools section of our website and click on "Insurance Companies We Work With".

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