Don’t Chase Rates: How To Decide If an Annuity Fits Your Financial Goals

August 25, 2025

With so much market volatility and uncertainty these days, it’s easy to experience decision paralysis when it comes to considering whether to purchase annuities.

Deciding if an annuity is right for you isn’t always straightforward. The answer depends on factors beyond simply chasing rates — although, in general, high interest rates yield higher payout rates.

When making this decision, consider your long-term financial goals, retirement timeline, health, liquidity needs, and more.

What’s the Real Role of Annuities in Your Retirement Plan?

Annuities offer distinct advantages that make them an attractive choice. They provide a predictable income for a set period or for life. A lifetime payout option protects against longevity risk, promising to continue payouts even if you outlive your original investment. Additionally, they act as a secure supplement to other retirement savings such as Social Security and pensions.

In uncertain markets, it's hard to predict what rates will do. As this article by Thrivent explains, even though today’s fixed annuity rates remain lower than the high rates of the 1980s and 1990s, they’re still significantly higher than the ultra-low rates seen during the pandemic. 

As such, annuities can be an appealing option for conservative investors. If you lock in today’s high rate now, you’ll be protected if the Federal Reserve cuts rates in the months ahead.

Why Chasing the Highest Rate Could Backfire

While it’s tempting to focus solely on current rates when evaluating annuities, that kind of narrow view may lead to a financial product that doesn’t fit your needs.

Working with a financial advisor can help illuminate an annuity’s terms and features, as well as align the right product with your specific life stages and goals. You’ll want to review details like surrender charges, which can be significant if you need to withdraw early. Also ask: How flexible is this product if your income needs change? Are there any add-on benefits you should be aware of?

How To Evaluate If an Annuity Fits Your Financial Goals

Here are some important questions to ask when evaluating if an annuity is right for you:

• Do you need lifetime income? Some riskier annuities base growth on market performance. Lifetime income might require the purchase of an optional income rider, which makes it more expensive.
• Are you trying to preserve capital or generate returns? Fixed indexed annuities take a more conservative approach to protecting your investment against a volatile market.
• Is legacy planning part of your strategy? Most annuities include a death benefit, which can be passed on to your heir.

There are several different types of annuities. Here are a few worth considering:

• Flexible Premium Deferred Annuity (FPDA): Instead of just one lump sum, an FPDA lets you grow your money over time with additional contributions. You can purchase a span to fit your needs, such as three-, seven-, or 10-year certificates.
• 5-Year Multi-Year Guaranteed Annuity: This type offers a guaranteed five-year fixed rate and tax-deferred interest that accumulates over a five-year period. At the end of five years, there is a new renewal rate based on current market conditions. It’s a good option for those closer to retirement.
• Single Premium Fixed Indexed Annuity: This product, typically funded with a single lump sum, protects your initial investment from market losses.
• Single Premium Immediate Annuity (SPIA): Best for those who are ready to start receiving immediate payments, an SPIA will secure lifetime income for as little as five years or for the remainder of your life. If you pass early, your beneficiary will receive the remaining payments.

Talk to Your Advisor About Building a Plan That Works

While annuities are powerful financial vehicles, they’re not for everyone — and they work best when layered in with additional investment strategies. To find out if annuities will work for you and your situation, speak with a financial advisor and review your retirement goals to find the right fit.

At 1891 Financial Life, we specialize in providing tailored insurance solutions that cater to diverse needs. Our team is equipped to help you navigate these challenges with expertise and compassion. Contact your 1891 agent today for personalized assistance and to explore how annuities can support your retirement strategy.

About 1891 Financial Life

Our culture is about looking out — for you, for others, for family, for the community. That is how we go “Beyond Life Insurance.”

At 1891 Financial Life, we don’t just sell policies, we offer possibilities. We pride ourselves on giving back to the communities that we serve by providing quality and comprehensive insurance solutions. We are a not-for-profit life insurance Society, which means the sales from these financial service products help fund member benefits along with social, educational, and volunteer programs designed to respond to community needs. In 2023, 1891 Financial Life was listed by Forbes as one of “The World’s Best Life Insurance Companies.”

Our portfolio is extensive, ranging from various life insurance policies to our annuities to support your financial needs no matter what stage of life you’re in.